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3 Lessons Learned from My First Startup Investment

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3 Lessons Learned from My First Startup Investment

In 2011, I made a major investment in a startup company for the first time ever. The company is called Help Scout—they make web-based help desk software that makes customer service a breeze for any business.

Ever since I invested, countless people have come to me with questions about startup investing. They think it’s simple—you find a great idea and throw money at it until there’s a huge IPO that makes you filthy rich. Right? Isn’t that how it works?

Nothing could be further from the truth. If you want to invest in a startup, here are the three key bits of information you need to know:

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1. You’re not actually investing in a startup.

You’re investing in people. When the time came for Help Scout to start seeking angel investors, the three guys behind it were so cool that they wouldn’t even ask me to invest. Why? Because I’d actually been investing in them since they were in college.

Prior to forming their own company, they had all worked with me as interns, and then as professionals when they branched out and created a web design firm. Over this period, I took an active interest in their growth as entrepreneurs and young men. By the time they were ready to launch the company, they thought I’d already done my part.

When I finally heard they were looking for investors, I asked to see the presentation they were showing to potential candidates out of curiosity. I read it and was sold. “Can I invest in this?” I asked them.

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“Robert,” they said, “this is very risky. There’s absolutely no guarantee you’ll see your money again.”

“Listen, I’m not investing in the business. In fact, I’m still not sure I even understand what you’re doing!” I explained. “But I believe in you guys. I always have. And I’ll believe in you forever.”

With that, they had another investor.

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2. The startup’s concept doesn’t have to make sense to you.

To this day, I do not fully understand Help Scout. I just don’t have a techy brain, and I’m aware that ideas in that field don’t always make sense to me. But I also never thought a hot dog on a stick would sell so well.

The point is to not get so wrapped up in an idea that you think is amazing, because amazing ideas don’t execute themselves. Even amazing ideas will fail unless you have a team of extraordinary individuals putting in 15-hour days week in and week out.

The first time I attended a TechStars event (which is the startup accelerator that gave Help Scout its start), just about every company that did their pitch wowed me. By the end of the day, I was ready to write checks to ALL of them.

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“What’d you think of this one, and what about that one! Weren’t those ideas amazing?” I said to some of the more experienced investors. I was stunned when, immediately, they dismissed them. “Those people will never be able to pull it off,” they said. Don’t focus on the extraordinary ideas. Focus on the extraordinary people, even when you don’t fully grasp what they’re pitching.

3. Don’t do it if you need the money.

This is one of the first things TechStars will tell potential investors. If you are investing your last $10,000, they do NOT want your money. If you are investing with the hope that you’re going to get a huge payday, go elsewhere.

I didn’t invest in Help Scout to make money. In my mind, that’s nothing but a bonus if it happens one day. I’m investing in the guys. When I wrote the check, the money, as far as I was concerned, became gone forever.

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If you’re not comfortable with never receiving a dime in return, investing in a startup is not for you. Period.

If you’re interested in investing in a startup, the main thing to learn is to find the best group of innovators and hard workers that you possibly can. Look beyond the idea and assess the people who are going to be putting in the hours. Look for people who, more than anything, you want to see succeed beyond their wildest dreams. Don’t invest in the company. Invest in the hearts and minds of those behind it.

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Last Updated on January 5, 2022

33 Painless Ways to Save Money Now

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33 Painless Ways to Save Money Now

In a difficult economy, most of us are looking for ways to put more money in our pockets, but we don’t want to feel like misers. We don’t want to drastically alter our lifestyles either. We want it fast and we want it easy. Small savings can add up and big savings can feel like winning the lottery, just without all of the taxes.

Some easy ways to save money:

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  1. Online rebate sites. Many online sites offer cash back rebates and online coupons as well. MrRebates and Ebates are two I like, but there are many others.
  2. Sign up for customer rewards. Many of your favorite stores offer customer rewards on products you already buy. Take advantage.
  3. Switch to compact fluorescent bulbs. The extra cost up front is worth the energy savings later on.
  4. Turn off power strips and electronic devices when not in use.
  5. Buy a programmable thermostat. Set it to lower the heat or raise the AC when you’re not home.
  6. Make coffee at home. Those lattes and caramel macchiatos add up to quite a bit of dough over the year.
  7. Switch banks. Shop around for better interest rates, lower fees and better customer perks. Don’t forget to look for free online banking and ease of depositing and withdrawing money.
  8. Clip coupons: Saving a couple dollars here and there can start to add up. As long as you’re going to buy the products anyway, why not save money?
  9. Pack your lunch. Bring your lunch to work with you a few days a week, rather than buy it.
  10. Eat at home. We’re busier than ever, but cooking meals at home is healthier and much cheaper than take-out or going out. Plus, with all of the freezer and pre-made options, it’s almost as fast as drive-thru.
  11. Have leftovers night. Save your leftovers from a few meals and have a “leftover dinner.” It’s a free meal!
  12. Buy store brands: Many generic or store brands are actually just as good as name brands and considerably cheaper.
  13. Ditch bottled water. Drink tap water if it’s good quality, buy a filter if it’s not. Get 
      a reusable water bottle and refill it.
    • Avoid vending machines: The items are usually over-priced.
    • Take in a matinee. Afternoon movie showings are cheaper than evening times.
    • Re-examine your cable bill. Cancel extra cable or satellite channels you don’t watch. Watch the “on demand” movie purchases too.
    • Use online bill pay. Most banks offer free online bill paying. Save on stamps and checks, and avoid late fees by automating bill payment.
    • Buy frequently used items in bulk. You get a lower per item price and eliminate extra trips to the store later on.
    • Fully utilize the library. Borrowing books is much cheaper than buying them, but in addition to books, most local libraries now lend movies and games.
    • Cancel magazine/newspaper subscriptions: Re-evaluate your subscriptions. Cancel those you don’t read and consider reading some of the other publications online.
    • Get rid of your land-line. Do you really need a land-line anymore if everyone in the family has a cell phone? Alternatively, look into using VOIP or getting a cheaper plan.
    • Better fuel efficiency. Check the air pressure in your tires, keep up with proper auto maintenance, and slow down. Driving even 5MPH slower will result in better fuel mileage.
    • Increase your deductibles. Increasing the insurance deductibles on your homeowners and auto insurance policies lowers premiums significantly. Just make sure you choose a deductible that you can afford should an emergency happen.
    • Choose lunch over dinner. If you do want to dine out occasionally, go at lunchtime rather than dinnertime. Lunch prices are usually cheaper.
    • Buy used:  Whether it’s something small like a vintage dress or a video game or something big like a car or furniture, consider buying it used. You can often get “nearly new” for a fraction of the cost.
    • Stick to the list. Make a list before you go shopping and don’t buy anything that’s not on the list unless it’s a once in a lifetime, killer deal.
    • Tame the impulse. Use a self-enforced waiting period whenever you’re tempted to make an unplanned purchase. Wait for a week and see if you still want the item.
    • Don’t be afraid to ask. Ask to have fees waived, ask for a discount, ask for a lower interest rate on your credit card.
    • Repair rather than replace. You can find directions on how to fix almost anything on the internet. Do your homework, and then bring out your inner handyman.
    • Trade with your neighbors. Borrow tools or equipment that you use infrequently and swap things like babysitting with your neighbors.
    • Swap online. Use sites like PaperBack Swap to trade books, music, and movies with others online. Also, look for local community sites like Freecycle where people give away items they no longer need.
    • Cut back on the meat. Try eating a one or two meatless meals every week or cut back on the meat portions. Meat is usually the most expensive part of the meal.
    • Comparison shop: Get in the habit of checking prices before you buy. See if you can get a better price at another store or look online.

    Remember that saving money is not about being cheap or stingy; it’s about putting money into your bank account rather than giving it to someone else. There are many ways to save money, some you’ve never thought of, and some that won’t appeal or apply to you. Just pick a few of the ideas that sound doable and watch the savings add up. Save big, save small, but save wherever you can.

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    Featured photo credit: Damir Spanic via unsplash.com

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