[bc_video video_id="6042390173001" account_id="4250799609001" player_id="hpkprVYKS6" embed="in-page" padding_top="56%" autoplay="" min_width="0px" max_width="640px" mute="" width="100%" height="100%"]

**Disclaimer: What I am about to share has nothing to do with the entrepreneur or company I backed. They were great. This was my mistake, and I am the only one to blame.**

Even the greatest angel investors aren’t perfect. Anyone who tells you they have a flawless track record is either lying, or not playing the game often enough to be a pro in the first place (more on that here).

We all weather losses from time to time. Do they hurt? In a way, sure – but when your overall portfolio is stacked with winners, those losses look more like valuable lessons than painful wounds.

Today, I want to tell you the story of my worst angel investment ever. Now, I’ve debated sharing this story for a long time, because the founders behind this particular startup were (and are) amazing entrepreneurs who I am confident will find great success in life.

And, of course, the last thing I want to do is freak you out or imply that angel investing is a losing game.

I’d be doing you a disservice if that’s what this story taught you – because, in fact, angel investing is one of the best and most reliable ways to strike proverbial gold.

That’s why, ultimately, I decided that you deserve to hear this story: because I don’t want my fellow startup investors to make the same mistake I did. Instead, learn from my experience.

Use it to make your portfolio that much stronger and boost your overall rate of return. If you end up with even more wins than I have, I will have done something right.

It all began back in 2008, when I was approached by the founders of a startup that was looking for seed money. That startup was called EVO.

EVO was out to solve a problem: there are more than 150 million domains on the Internet, and almost a third of them are left completely unused. Many are simply empty; others have longstanding server issues or were abandoned long ago; and some are “parked,” or saved by some unknown owner for possible later use.

That’s a lot of real estate going to waste. EVO came up with an easy way to monetize all that dead space.

I liked the idea right off the bat – it solved a real problem, had the potential to scale without taking on large operating costs, and the founders inspired confidence with their experience and passion. In fact, if they came to me today with another idea, I wouldn’t hesitate to invest in them again.

So I invested. And the business has done quite well.

EVO never went under, and continues to make money. By all accounts, it’s a successful business, firmly planted in the green.

But it doesn’t add any oomph to my overall batting average. Here’s why: EVO’s business model is overly reliant on Google’s site-ranking algorithm.

I won’t get too technical here, but suffice it to say that Google has a system it uses to rank websites based on their effectiveness. Sites that have issues with usability, security, spam, and overall quality are penalized – they don’t come up in Google’s search results page.

When you’re managing hundreds of thousands of domains, it’s pretty scary (and restrictive) to rely on a single potential point of failure. EVO operated within a single channel. And they did so successfully.

But their growth was limited as a result, whereas a business that can work within multiple channels has a much higher chance of becoming huge.

EVO has made a few key pivots since I first got involved in 2008. They’re doing really well, and I’m happy to be part of their story.

But, to be honest, I don’t expect that I’ll ever make a killer return from my investment with EVO. It’s been more than 10 years, and they aren’t on a path that will lead to a big acquisition or an IPO.

And that’s okay. I’m proud of the business they built. Those guys are hard workers who don’t quit. They check all of my boxes when it comes to recognizing exceptional entrepreneurs.

Plus, the lessons I took away from this experience have helped me make better investment decisions going forward.

First, I never invest in small ideas. I want my portfolio’s growth potential to be virtually unlimited – and that means only investing in multibillion-dollar markets (more on that here).

Second, I always take the time to identify possible points of failure. If a startup’s success hinges entirely on one critical assumption, it’s probably not the best choice. A great company has a built-in ability to pivot, adapt, and pursue other avenues if one of their assumptions turns out to be wrong.

Since then, my track record as an angel investor has markedly improved. I learned my lesson the hard way, and grew as a result.

But the way I see it, you shouldn’t have to make an expensive mistake yourself just to learn how to play the game. That’s why you have me… and I’m going to keep the lessons coming. So stay tuned.

Until next time,

Neil Patel


Comments

18 responses to “My Worst Angel Investment Ever… And What You Can Learn from It”

  1. Neil you must be aware of CBD oil and hemp, which company would you invest in.which start up would you recommend?

  2. Hello, my name is Joyce and your website is one of several sites I have.As a senior citizen on a fixed income I don’t have an endless amount of money, so I hope you’re not one of the bate and switch people who tell you of a great deal then you have to buy all their products just to get real info on what stocks or startups to buy.I just want to get in the door with one good investment to make enough money to buy more..

  3. I’m a little bit like Joyce, in that I don’t have a lot of money. I got laid off in 2011 in my 50’s, tried other things to make money that didn’t work. I ended up getting swindled by a sham online investment company overseas that I couldn’t take legal action against because they vanished into thin air. I seem to have the reverse Midas touch. Everything that I’ve been looking into is like Joyce said, they dangle the bait, and then you have to subscribe to something else to supposedly get the real details. If $50.00 is REALLY all you need to get started, then I wouldn’t feel bad if that’s all I lost. I don’t like doing things by myself until I’m sure I know what I’m doing. I see one of the terms in your dictionary is GROUP Angel. That sounds like just what I need, as long as there isn’t some huge minimum amount to join one.

  4. I I in a beginner in all this what’s a portfolio and who has to keep up with what am trying to invest for future and can’t afford to be scammed seeing I only get disability but I’m tired of beign broke and I know that even in this there are risks but who.will make my investments me or Angels Investment.

  5. Fixed income , but work security to help the bills, lost over $600. investing. would like to get help to make money.

  6. I lost investments and I need help. Thanks Neil Pate. I am interested in investing into the business. I want the training.

  7. All the above comment make me fill like, I am not the only starting to invest late in life, on a fixed income, or chasing a dream, fortunately I am not chasing it for myself. One of the things I have learned from reading on this website most of the afternoon, is that its a good thing that I am not chasing it for myself. I hope to be able to invest, read more and ask question, and an attorney to rewrite and update, My Last Will and Testament, and leave a legacy of my investment for my loved ones, like my grand children, my nieces and nephews’ and my adopted three year old boy playing behind me as I type this. I hope its an investment for them and not for me or even my wife, who is not much younger and almost as old as I :-).

  8. Hi Neil,
    I listened and took notes on the Summit. I have doubts because of all the negative issues going on in the investment world. I know of someone who have lost over $400,000. of her retirement savings because of an investment venture that went so wrong. So now instead of living comfortably, she only relies on her social security. Like her I do not have sound background in investing. i can only assure that I can be coached and willing to learn, I have a very huge WHY’s for joining, For me, it is now or it may never happen. Ive been watching Mr. Robert H at shark Tank and so Dancing with the stars and he truly is my favorite. in those shows. I kind of like you, Mr. Neil in your presentations. Here, I am hoping that I could pick some good lessons and apply in this venture, make some good investments, fulfill my WHY’s, and have fun along the way. Am retired and still have a lot of goals to achieve!!! thank you and Robert. TRC

  9. Neil,
    I’ve studied here and there for years, from reading websites to Warren Buffet, on how to invest and not lose money. I like your platform here because you did all the work and offer your experience and investment advice. Thank you.

  10. Hi Neil,
    Thank you for all of the valuable information thus far. It has been a great help to me. But there is one session I can not access at this time, Speaking ‘Silicon Valley’. When I try to access it it returns page not found. Will it be available again? I am definitely interested in reading it.

    • Hi Dorlis,

      Thank you for your comment regarding our “Speaking Silicon Valley” report. We have fixed the link, so you can find your exclusive Silicon Valley dictionary by clicking here.

      Have a great day!
      Blair
      The Startup Investor

  11. Hi Neil, I am very much interested in what you r saying, Also I have watched Robert in Shark Tank and trust him and seems like a good kind and sincere person.. My husband and I met in pharmacy college in Liverpool in 1972 and after working for 3 yrs in UK .Came to America got back to college to get American Pharmacy degree worked very hard, worked lots of OT and put husband through med school. Sponsored sis form UK whose son and her convinced me to invest in. vv expensive Restaurant to help her . Lost millions and had to file Bankruptcy. We also lent lots of mony to friends and family to help them and never saw a penny back. I would like to invest . But am afraid at age 67. We have lots of innovative ideas ourselves eg nutrition weigh balance and others. Paid scientist friend to do research in India in 80’s But never got back to us and used up thousands of our hard earned after tax money.
    I highly Trust Robert having seen him on Shark Tank . So in short
    can you tell us how I can Invest in the ideas you are talking about and how you can help us with our innovations?

  12. I understand that there is risk in all investments. The Startup Investor helps to minimize the losses. It is very detailed information, but when you work hard for your money, you want every opportunity for your money to work hard for you, right? Thank you for this information.

Leave a Reply

Your email address will not be published.