FWIW, DropBox took a helluva lot longer than 6 months to get to the "security standards enterprise firms expect" (they still had major security incidents several years after public launch), and look where they got to.
Casetext seems eminently reasonable. They have founders with solid domain knowledge, are solving a very painful problem for an industry with deep-pocketed players, seem to have an easy-to-use product, and have demonstrated measurable traction. I'm tempted to invest once I do a bit more due diligence on both WeFunder and CaseText.
1. The median valuation for pre-revenue startups that raised angel investment in 2012 was south of $3 million, so an $8 million cap is quite generous based on where Casetext is at in terms of meaningful traction.
2. Historically, it has not been uncommon to see convertible note interest rates as high as 10%. Not surprisingly, rates have come down in recent years (I believe the median rate was 5.5% a couple of years ago), but 2% is really low.
Based on my knowledge of the legal market, I don't necessarily agree that Casetext presents a compelling investment, but even if you do, the reality is that successful angel investments are based on two things: a) investing in good startups and b) investing at the right price and on the right terms.
Finding the former without being able to do the latter is sort of like picking next week's winning lottery numbers this week. You'll have a great story to tell your friends but no money to show for your troubles.
I'd argue that successful angel investment is based almost entirely on a.) and negligibly on b.). These are not the public markets, where a startup has been growing for 5-10 years and largely tapped out its markets. These are very speculative markets where the vast majority of startups end up earning nothing and the one big hit can represent a 1000x return on your investment. Valuation at that stage is the difference between ponying up $1000 and ponying up $2000 for a seat at the table.
When you're investing at $100M rather than $8M the equation changes substantially. That's where we were during the last dot-com boom; we're pretty far from there, unless you're a Facebook investor.
> ... one big hit can represent a 1000x return on your investment.
Sounds great! There's only one problem: your $1,000 investment in Next Big Thing Inc. is not going to be worth $1 million. The data is very clear: most individual angel investments lose money, and overall, the type of returns angel investors see on their overall portfolios all but rules out the idea that there are 1000 baggers out there.[1]
In short, it sounds like you're looking to hit a Major League home run with a tee ball bat. If you're searching for massive returns, you need to look at markets in which you can make much more highly leveraged bets. Many of these, like CDS, are inaccessible unless you have tens of millions of dollars to play with, and that's at an absolute minimum.
By the way, regarding public markets: if you had invested in the right equities over the past five years, you could have produced better returns than most angel investors without taking on anywhere near the risk. Obviously, picking the right equities to invest in is easier in hindsight, but so is picking the right early-stage startups to invest in.
Casetext seems eminently reasonable. They have founders with solid domain knowledge, are solving a very painful problem for an industry with deep-pocketed players, seem to have an easy-to-use product, and have demonstrated measurable traction. I'm tempted to invest once I do a bit more due diligence on both WeFunder and CaseText.