So you want to start angel investing?
It's more accessible than you think. But there's also a lot of snake oil out there.
Here's 4 steps to start angel investing sustainably, strategically, and with a higher likelihood of generating a good outcome:
🧵
It's more accessible than you think. But there's also a lot of snake oil out there.
Here's 4 steps to start angel investing sustainably, strategically, and with a higher likelihood of generating a good outcome:
🧵
1. Set a budget.
Angel / VC investments are high risk / high return. That means there's a high chance you'll lose what you invested, and a small chance you'll make a LOT of money. Kind of like a lottery.
Would you spend tons of money on the lottery? Probably not.
Angel / VC investments are high risk / high return. That means there's a high chance you'll lose what you invested, and a small chance you'll make a LOT of money. Kind of like a lottery.
Would you spend tons of money on the lottery? Probably not.
Also consider: angel / VC investments take a LONG TIME to bear fruit. Like, a decade or more. So whatever you invest, be prepared to not have access to that money for at least a decade, at most never.
TL;DR:
Angel / VC should be a SMALL PART of your portfolio.
TL;DR:
Angel / VC should be a SMALL PART of your portfolio.
How small is up to you. You might decide you can part with 1% of your annual income. You might set aside a dollar amount - not a % - that you will invest over a period of x years. It's always ok to start small.
2. Plan your portfolio.
To maximize the odds of great returns, you want to invest in a high # of great companies. Decide up front how many, how much, and in what time period.
e.g. 4 companies a year, $5k each, for 3 years. I will reserve another $10k per company for follow ons
To maximize the odds of great returns, you want to invest in a high # of great companies. Decide up front how many, how much, and in what time period.
e.g. 4 companies a year, $5k each, for 3 years. I will reserve another $10k per company for follow ons
Also important: ask yourself what types of companies do you want to invest in? Do you care about the sector? Geography? Business model? Team? Tech?
It helps to know your values. The more co's you look at, the more you'll have reject. Build your own guidelines, and let them grow.
It helps to know your values. The more co's you look at, the more you'll have reject. Build your own guidelines, and let them grow.
3. Find your deal flow.
The more companies you see, the more selective you can be to find the really great ones. But that means you'll want to see lots of companies. How?
The more companies you see, the more selective you can be to find the really great ones. But that means you'll want to see lots of companies. How?
Good news: deals are everywhere!
- Join communities of entrepreneurs
- Tell your friends you're investing
- Follow investors and entrepreneurs on twitter
- Attend pitch nights and demo days
- Join communities of entrepreneurs
- Tell your friends you're investing
- Follow investors and entrepreneurs on twitter
- Attend pitch nights and demo days
For first time angels, I highly recommend you join angel groups. That way you get access to screened deal flow, learn to run a good due diligence process, and meet great co-investors in the process.
Special note on small checks: if you're investing <$10k/deal, some entrepreneurs will not take your check directly. Love it or hate it, they have good reasons (for another 🧵). You may need to invest through syndicates, e.g. @joinrepublic, @AngelList, and angel groups.
Another pro tip: Micro & nano funds are a *great* way to diversify your portfolio from the get go. And if you invest in emerging funds, your investment is very much akin to an angel investment, in that you're helping the manager build something new ✨
4. Stay disciplined, and stay out of the way.
Stay disciplined so you don't burn out and don't run out of $$. You will get better as an investor over time - so you don't want to burn through your investing $$ too quickly!
Stay disciplined so you don't burn out and don't run out of $$. You will get better as an investor over time - so you don't want to burn through your investing $$ too quickly!
What about "stay out of the way"?
Once you invest, be supportive of the founder/team and add value however you can. BUT, you shouldn't be a high-maintenance investor. As long as the founder is sending you updates on a regular basis, don't breathe down their neck. Let them focus.
Once you invest, be supportive of the founder/team and add value however you can. BUT, you shouldn't be a high-maintenance investor. As long as the founder is sending you updates on a regular basis, don't breathe down their neck. Let them focus.
Angel investing, done right, is super fun, can be high ROI, and helps an entire ecosystem grow. It's also high risk, time consuming, and hard to do right.
If you're ready to jump in, DM me, I can help!
If you're ready to jump in, DM me, I can help!
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