Making money off startups without being a VC

In video form:

The invite

A group I'm in was invited to contribute to a successful VC firm's next funding round.

That might sound tempting – after all, it's a pretty unique opportunity to have some of your portfolio in hand-selected, high-growth companies that could 10,000x your money. Next stop, retiring on the beach with your Lamborghini Tesla and your mansion.

The barrier to entry

The catch is, you need to be a "Sophisticated Investor", which requires $2.5m in assets, or having earned $250k/yr for the last couple years.

So, given most people aren't going to meet that bar, what do? If you're convinced a particular startup is going to the moon, how do you profit off that?

The alternative ideas...

Consider the following a brain dump and not actual advice:

1. Work There

The most obvious of them all – get hired at the startup of choice, be given equity in some form (options, probably), and have your net worth grow as the company's growing.

2. Help their users

With Tutorials
Canva is this VC firm's poster child. It was a zillion-x investment for them. I can't tell you how many Canva tutorials I've watched, that have been made by seemingly regular people, that have hundreds of thousands or millions of views. It seems like some people have made their careers off Canva tutorials.

Canva's user base exploded. If a company's user base is exploding, and your user base is their user base, your user base is probably exploding too.

With Product Reviews & Comparisons
I've also watched a bunch of product reviews and comparisons for startups like Allbirds, Oru Kayak, and SmileDirectClub, where the reviewers are having similar explosive success as the startup they're promoting.

And they normally spruik affiliate links, too... I imagine it's paying off for them.

3. Make third-party apps

If the company has its own ecosystem you can build on top of, build on top of it!

Remember when Google Chrome was niche? Well, it exploded, and the early chrome extension developers got to profit off that growth.

Going back to the Canva example, users who provide images and templates to the platform are also profiting when other users pay for those elements.

Atlassian's third-party plugin system is a 1 billion dollar industry. Huge. I used to work there, and we had a running joke that as employees, the best way to make bank was to:
- quit
- build a third-party app for Jira
- get acquired by Atlassian again
- ???
- profit
This happened successfully a few times. The canonical example was CodeBarrel, aka Automation For Jira, which not only targeted Jira user's but also targeted the users of other great growing companies by connecting them to Jira - Slack, Gitlab, Github, Teams, Twilio, Jenkins, ...

Who's next to make plugins for? My guess is Warp, down the line, as they've said they'll be making a third-party plugin system. Also Palantir's Foundry platform.

4. Build on the platform

Very similar to 3, yes, but for broader platforms rather than individual products.

I know iOS devs who made their own apps when iPhones were new. They were betting on the growth of the landscape. And they were half right - their apps failed, but, their skills of developing apps were very in demand at a time when everyone needed iOS app developers and hardly anyone had those skills. So, they were able to make bank off baller salaries.

I've heard a similar thing is happening in the crypto space. Friends have developed their own crypto projects, and even though unsuccessful, their skills are in high demand when everyone's trying to build on the promise of web3. There aren't that many trusted engineers in the space. The result? Lucrative salaries.

I wouldn't be surprised if a similar thing is happening in the VR and AR spaces.

And sure, I'm thinking about this as a developer myself, but it probably goes for all industries - UX, product management, psychology, marketing, law, probably everything.

5. Tell that company's story

This may just be my obsession with business-related content, but I've found many a podcast, book, movie, youtube channel, blog, etc, because I've become curious about a business, and said podcast has interviewed the founders or broken down the business strategy. Normally I find those podcasts years after they were made, but from that point, I'm a regular listener.

6. Work there... but not (just) for equity

Career growth
If you're sure this company is going to grow like mad, what better place to grow with it? You can start taking on more responsibility, have more flexibility to jump into roles you'd like to try, go into management... whatever floats your boat.

In a larger stable or declining company, at least in the extreme case, you may have to wait for everyone above you to retire before you can move up.

Strategy Osmosis
Working for a successful company gives you access to the strategies they use to get ahead. You can see what's working well, and perhaps just as importantly, what isn't working too. You can take that knowledge to use in your own venture down the line, or use it to make investment decisions now for companies that you can invest in that are taking similar approaches.

In the wise words of Naval, who's an angel investor himself:

"I advise a lot of people who are looking at which start-up to join in Silicon Valley. I say basically, pick the one that's going to have the best alumni network for you in the future. Look at the PayPal mafia, they worked with a bunch of geniuses so they all got rich. Try and pick based on the highest intelligence, energy, and integrity people that you can find."

Why these ideas suck

These aren't going to work with a lot of startups. If you're itching to invest in SpaceX, good luck making tutorials or third party plugins to ride their coat-tails (or maybe you're more creative than me?).

There's also the risk of building a product on top of a successful company's product. There are people who made successful Amazon stores, and when Amazon saw this, they made their own clones and put themselves at the top of people's searches, thereby seriously handicapping the original business. There's dozens of companies that made iPhone apps and accessories, and when Apple themselves saw the success and built those features straight into the iPhone, those companies died. MKBHD has a great video on that here:

And there's also the obvious point that, even if you're doing these things and you're successful, you're still not getting the same return the VC investors are.

But hey, I hope this was interesting.

If you want to drop a comment or get in touch, drop it on the video or on twitter.