As a Sovereign Individual, your goal is to become financially self sufficient as quickly as possible. That means creating a multiple income portfolio and an investment portfolio. As part of your income strategy, you want to try to start and buy companies that generate positive cash flow. And while it may be challenging to buy a company when you’re just starting out, you can change your investing mindset to fund your acquisition of future opportunities.
Your goal should be to create your own personal seed fund to make an angel investment in yourself.
Building A Fund to Angel Invest in Yourself
Angel investing in yourself is a simple mindset shift, yet it’s tough to actually execute. Your goal should be to reframe how you approach traditional investment returns. Effectively split your investments into 2 buckets. One, the traditional path designed as retirement savings. The other, your angel portfolio that you’ll use over the next 5 to 10 year period to reinvest profits in yourself.
I used this mindset when I designed my crypto investing strategy. ie: My goal is to aggressively grow my capital by investing in a major technology trend at the societal level. Assuming I make good investments, I’ll then extract some of this capital and put it towards buying my own cash generating activities. I think of it as an angel investment in myself. Creating a business called – Me, Inc.
By investing relatively early, I hope to grow my capital by 100x in the next 5 years. Perhaps an overly ambitious goal, but based on historic returns of the crypto industry, this isn’t an insane idea. It’s an aggressive goal and obviously not guaranteed. The total return amount isn’t really the point.
Investing to build an angel fund is more about setting a target date and attempting to maximize returns within that window for a specific goal aside from retirement.
Using Power Laws For Fund Building
I recently read Peter Thiel’s book, Zero to One and the chapters on power laws and his investment philosophy stood out. The simple crux – you want to make investments that will succeed along the power laws of distribution. Concentrated bets on the few opportunities that can create monopolies by dominating new industries. Through these monopolies, your investment can and should be greater than all the returns of your other investments combined.
Now obviously – this is easier said than done. But adapting it to my purposes, when I’m making investments, I try to size them up so that if they were to 10x they would at least return my initial invested capital of my entire portfolio. And with the Crypto side of my fund portfolio, ideally they would return 100x.
Constructing an Angel Investing Fund via a Crypto Portfolio
In general – I have a more conservative mindset with my traditional equity investments. I’m trying to balance capital preservation with growth. But with my angel investing fund, I invest aggressively and typically use cryptoassets as my vehicle for growth.
Here’s how I do it. (This is not investment advise – I’m using my personal allocation as an example)
My goal is to invest around 20% of my net worth into the crypto. I do not invest the entire 20% at once, rather, I design my strategy and dollar cost average into it. From that 20%, I aim to invest about 50% in bitcoin, and between 20 to 30% in ethereum. The remainder I split among other digital assets.
My thought process is that bitcoin will eventually become a global reserve currency and that over time, I want to accumulate bitcoin as my personal reserve currency. Any time I take profits in an altcoin – I invest it into my bitcoin position. Ethereum represents the underlying asset fueling many of the more interesting blockchain applications to date. For the time being, I want to have a relatively sizable position there to have that exposure.
Investing in Altcoins a la Venture Capital
For altcoin picks – I view my investing strategy as a venture capital process. I look to split my altcoin allocation across 10 to 15 projects that I think are interesting. Interesting use cases, features, teams, or investors that back the project are aspects I look for. I also look for smaller market cap opportunities (under $1 billion but not below $100 million) because to me these represent opportunities that have achieved recognition without yet hitting the mainstream. This is my 10 to 100x sweet spot.
I’m also careful to check how these performed before the current bull market. I don’t want to buy into bad projects that benefited from rampant speculation. A rising tide lifts all boats – even the ones with holes in them.
My allocations start small with these projects and I’ll add to them over time as my opinion of them improves. But mainly – the goal is to buy and hold for a long time (~ 5 years). I go into it expecting most will end up being worthless and like in VC, if I’ve constructed my portfolio correctly, I’ll only need 1home run to profit across the entire portfolio. My goal for these is 100x my initial investment. My belief is that if I invest in reasonable projects they will benefit from institutional inflows into the bitcoin/ethereum ecosystem over time.
Exit Strategy to Angel Invest in Yourself
As circumstances change, perhaps crypto investing will no longer present such a fantastic opportunity. Or if I’ve achieved my initial 10x target, I may consider taking profit. Unless I have achieved my long term goal, the only reason I would take some profits at this point is to redeploy them into something that has a better opportunity to 10x. I’m not wedded to any one project – the true goal is to achieve 100x of my invested capital. 10x in one project and then 10x in another achieves that goal.
But here is the catch – when I look to take profits, I’ll do so in bitcoin, not fiat. I do this is for several reasons. To keep the funds in the digital asset ecosystem, readily available for the next investment, and if I need to hold the profits for more than a day or two, I prefer exposure to bitcoin over fiat. Additionally, over a longer term time horizon (I don’t have a specific idea of how long), I expect that bitcoin will become the de facto digital reserve currency. It will allow me to make the angel investment in Me, Inc. via a direct purchase of a digital business or asset. By taking profits in bitcoin, my goal is to cut down on transaction costs and taxable events.
Angel Invest in Me, Inc.
As soon as I’ve 100x’d my initial investment, I shift my mindset to investing directly into Me, Inc. This concept is just another way to think of myself as my own business. My overarching goal is to build a multiple income portfolio that supports financial resilience, independence, and freedom to pursue the things in life that make me happy and secure.
Once I’ve established my own angel investment fund I can then redeploy that fund towards buying businesses that generate recurring cash flow. By owning more than one form of cash flow, I become more resilient to unexpected changes in society that may otherwise create hardships. As my cash flow position improves and provides an excess beyond my regular needs, I can begin to reinvest these into my long term retirement and starting a new angel investment fund.