Do you have any advice for investors who are just getting started, whether they're looking at startups on Propel(x) or another outlet, for what they should look for and how to do their own due diligence?
Yes, absolutely. Don't consider this advice. I'm a registered rep, so I'm not giving advice here. But these are some things perhaps that people could keep in mind.
I think for an investor who's just starting out, it's relevant to understand how much money you should be allocating, right? How much money should you have to start out? How much wealth should you allocate to this? Different people have different portfolio allocations, and institutions invest a large amount of their portfolio into alternatives such as venture capital—for example, 20% or more. But as an individual, your risk profile is different. So understand your own risk profile. And the rule of thumb could be anywhere in the 5% to 10% range. Again, this is not advice, and it depends on every person's individual risk profile. It could be less than 5% for some and more than 10% for others.
But you want to then to understand, what are your total investable assets? Let's say it's $5 million. Five percent of that—okay, I have $250k to invest. Then you say, okay, now that I know the pool of wealth I have [to invest], you should diversify it. You should always think of it as a portfolio strategy and plan to invest in, let's say, 20 startups if you're doing venture capital. That, that helps you to determine, okay, you're going to be doing $12.5k for every startup. That's where you're at. So then you have to look for avenues for finding deals that will accept that amount. Typically it would be platforms because otherwise, angel investment is typically around the range of $25k or more.
So that is how you should start thinking of it, starting from the highest level of portfolio allocation. Should I have alternatives? If I want to have alternatives, what would be the percentage and what kind of alternatives should I have? Do I want real estate? Do I want venture capital, crypto, something else? Having determined that, then you go for the portfolio approach. This is how much you're going to invest, I'm going to invest in 20 different opportunities to be diversified. So that's just getting started. I can go into due diligence; I've written extensively about it, but in venture capital and startups, there are certain risk factors—just list the risk factors, and go down that list as to how you would want to conduct your diligence on that.