The Historical Impact of Early Stage Investment

Are you aware that the concept of early stage investment has been around for centuries? In fact, it has been a cornerstone of many successful financial institutions throughout history. Take Goldman Sachs, for example, which began its foray into early engagement as far back as 1869, well before it began underwriting IPOs in 1906. Investing in startups has always been a cautionary tale of fortunes created and lost, but it has also been a catalyst for innovation and economic growth.

As an angel investor, it is important to recognize the historical impact of early stage investment and to invest only in domains of knowledge that you understand, and invest only an amount that you can afford to lose. Thorough due diligence is also key to success. While traditional assets, such as real estate or publicly traded shares, can be stable, they can also lose value during periods of inflation or crises. Publicly traded shares can have volatile values, making them difficult to consistently capture gains. The long-term gains on publicly traded shares are generally around 5% to 6%, with some years generating losses.

However, early stage investments have the potential to perform very differently from traditional assets. Throughout history, successful early-stage investments (before Series A) have shown upwards of 300% returns, leading to the creation of many fortunes. Take, for example, the historical success of investors like J.P. Morgan, who backed Thomas Edison's electric light company in the 1870s, or Warren Buffet, who invested in the Washington Post in the 1970s.

By investing a small fraction of your portfolio in early engagement, you can reduce your exposure to inflation and market fluctuations, and increase your overall portfolio performance. More recently, some of the highest performers in the startup world include Peter Thiel, who invested $500,000 in Facebook in 2004 and made a ROI 2000x, turning his investment into $1 billion, or Andy Bechtolsheim, who invested $100,000 in Google in 1998 and by 2004 his investment was worth $1.5 billion, which is a ROI of 15,000x. Other examples include the startup Ring, which was acquired by Amazon and generated an ROI of 200x for the group of angel investors.

As a startup founder, the historical impact of early stage investment cannot be ignored. By presenting a compelling case and performing thorough due diligence, you can attract angel investors who understand your domain and share your vision. Early stage investment can help you scale your business and achieve your goals, but it requires proper risk management and a keen understanding of the historical context. By investing wisely, you can achieve your financial goals and help fuel innovation and growth in the startup ecosystem.