Feb 7, 2018, 7:47 AM ETInterview, Fireside Chat

Startup Investor School Preview with Geoff Ralston

Event Format: A four-day inaugural course held in person at the original Y Combinator building (320 Mountain View) and simultaneously as a live-streamed Massive Open Online Course (MOOC).
Primary Objective: To increase the number of effective angel investors by teaching basics, sharing YC's accumulated knowledge, and helping participants avoid common pitfalls.
Target Audience: Accredited investors defined by SEC rules regarding income and wealth; the course aims to add greater diversity to the investor ranks.
Investment Scale: While minimums of $5,000 exist, typical angel investments range from the tens of thousands to hundreds of thousands of dollars, requiring investors to be prepared to lose the entire principal.

Day 1 Foundation: Covers the history of investing, tracing the evolution from self-financing (e.g., HP's $538 startup capital) to the emergence of Venture Capital (e.g., $70,000 investment in Digital Equipment Corporation yielding $35 million).
Deal Mechanics: Demystifies modern investment instruments like convertible notes, which have replaced simple equity shares for speed and cost-efficiency, and introduces the "handshake protocol" for verbal deal cementing.
Portfolio Management: Teaches asset allocation strategies, cap table dynamics, dilution math, and the "quid pro quo" relationship between investors and founders.
Future Trends: Addresses 21st-century shifts including the rise of accelerators (YC), the professionalization of "super angels" and micro-VCs, and emerging capital mechanisms like ICOs and AngelList.
Mentorship Integration: Features four prominent angel investors sharing personal stories and "angelic advice" on handling deal flow and post-investment relationships.

Founder Assessment: Emphasizes founder resilience and obsession over raw metrics; a lack of deep belief in the mission is identified as a primary red flag.
Interview Technique: Recommends "pushing" founders on potential failure points to gauge their reaction and preparation rather than relying on a "vibe" check.
Calibration Advice: Suggests meeting with at least 10–100 companies before making a first investment to properly calibrate judgment, though exceptional opportunities may be rare even for first-time investors.
Risk Mindset: Advises investors to operate under the default assumption that every new investment is worthless (value = $0) until proven otherwise.
Rejection Protocol: Stresses the necessity of learning to say "no" explicitly and kindly to maintain relationships and ensure high-quality deal flow for future opportunities.
Avoid "Last Money" Syndrome: Warns against waiting to be the last investor in a round; the most valuable angel investors have the courage to lead rounds with $0 raised as a sign of strong conviction.
Relationship Building: Prioritizes being a non-jerky, supportive cap table member, as reputation drives future deal flow more than minor financial extraction.

Jeff's Successful Case: One of his earliest successful IPOs occurred in a tough wireless hardware space because the CEO was a trusted, highly capable former colleague, overriding his lack of familiarity with the specific market.
Jeff's Admitted Mistakes: Includes investing in family, failing to conduct due diligence, investing in unfamiliar spaces without expertise, and being misled by founders' apparent intelligence.
Geographic Constraints: Investors generally avoid international markets due to complexity and lack of ecosystem understanding, preferring regions where they possess a belief system or familiarity.
Role of the Angel: Clarifies that while angels can be helpful, 99.9% of startup success credit belongs to the founders and team; the angel's primary role is capital and limited guidance.
Value Add Philosophy: Acknowledges that while some investors claim to only invest where they can add value beyond capital, the personal reality is often a mix of excitement, belief in the team, and the desire to create change.

Application Portal: Applications open on Thursday at investor.startupschool.org and will be cross-posted on the YC blog.
Course Structure: Consists of eight sessions over four days (two classes per day), designed as a crash course rather than a graduate-level program.
Future Iterations: The course is framed as an experiment; organizers plan to refine and repeat the program if initial feedback indicates success, potentially adding modules for international investors.