Angel Investing | Networking, Benefits, and Drawbacks

Angel Fundamentals

In this article, we will go over the fundamental elements of angel investing. These topics are essential for you to decide if angel investing is something you should pursue.

So, what is angel investment? In short, it is when people or a group of people invest money into a small business in its early stages.

Outside of one’s own belief, there are no formal qualifications to be called an angel. Many people have their own ideas about what an angel is, and these definitions may vary from yours. The bottom line is that everyone can be an angel in this sense.

Let us explore some of the basics of angel investing.

You may be asking how the phrase “angel investing” got started. It all began on Broadway, in the theater sector. Rich people were financing theatrical shows; they covered start-up fees for projects that would have to close down and would then get paid back after they began to earn money.

The Key Components of Angel Investing

Angel investors give money to startups in return for a fraction of ownership equity. This usually happens before the company seeks venture capital and after founders have used their funds (bootstrapping) and contributions from friends and family.

Angel investors give business owners or founders money for partial ownership of the company, which is called equity. The amount of money varies depending on the geography and industry, but it typically ranges from $25,000 to $250,000.

Angel investors are people who usually have experience with owning small businesses or entrepreneurship. They invest their money into startups that might become successful. These investors sometimes know a lot about specific industries, which can help them see if a business idea is good or not. Many angels spend their life learning about one industry or sector, which often leads to the success of the startups they invest in.

There are many angel investor biographies. It might be someone with a past financial background who has the time and resources to pursue this sort of investment. It could also be someone who was in the financial sector and now has a pension and other investments that take little attention, so they are seeking alternative ways to invest their money.

Individuals may come from a variety of backgrounds, including accounting. Some have worked for big firms for many years or even started their own businesses before moving on to other jobs.

Individuals may come from a variety of backgrounds, including accounting. Some have worked for big firms for many years or even started their own businesses before moving on to other jobs.

  • Enthusiast angel investing: From a few dollars to $10,000 per investment
  • Professional angel investors provide $25,000 to $200,000 per investment.
  • The typical entrepreneurial angel invests between $200,000 and $500,000 per deal.

Angel Investors

Is Angel Investing Right for You?

Having spare cash and a passion for investing in new prospects that pique your interest is a must if you want to be an angel investor. We feel there are better choices with much higher degrees of certainty, less volatility, and greater liquidity if you simply do it for the money.

It is also critical to have a skill set that will be useful to the companies you are backing, such as being an expert in the industry or sector you are investing in or your investment. However, this is not always required. Angel investing is high-risk, so do not invest your retirement funds into startups. Do not become an angel investor if you cannot afford to lose the money allocated to these investments.

When investors in the stock market pick a firm, their primary concern is the return on their investment. The case for angel investors is slightly different. Of course, financial motivation is high on the list. However, angel investors understand that many of the firms they will invest in may fail, and as a result, they anticipate it to happen.

The main objective for angel investors is to see the company they invest in grow and become more valuable so that when they sell their shares, it is for a higher price than what they paid. However, becoming an investor Hero (for lack of a better term) is extremely rewarding in itself. You get to be a part of the company’s growth journey from the beginning stages, like fetching contracts and developing prototypes which many angels find fun and exciting. The financial rewards will come eventually.

The investors’ angel expectations regarding the management team (CEO, CFO, etc.) are also high. They want them to be honest with them and give regular updates on how the company is progressing. When managed correctly, they believe the founders should be capable of keeping their money in good hands. They expect the owners to run their businesses ethically. Finally, they anticipate that the firm will desire them to develop something that their consumers would appreciate and that it would address a significant enough issue so that many people would pay for it. Some go as far as to expect traction from a startup.

Investors may choose to sell out of a company at a profit if it grows and becomes more valuable. If the firm is not doing well, they may want to sell their shares to others who wish to buy them (if the offer is good). There is always the chance of receiving nothing in return.

The Benefits and Drawbacks of Angel Investing

Even though it may be risky, angel investing can provide amazing benefits.

Angel investing, in and of itself, provides asset diversity and is completely disconnected from other assets. Startup investing is generally priced and valued differently than other asset classes. It is a high-risk, high-reward sector full of risk.

Second, angel investing may offer intellectual satisfaction since following a firm’s progress and adding value to it may be intellectually gratifying. Building something useful and valuable will be rewarding in and of itself, just as solving a puzzle or cracking a code is. And there will be plenty of learning along the way!

Third, angel investing allows you to interact with other individuals in your industry with similar interests and goals. You will be able to meet interesting entrepreneurs, investors, partners, and others. Personal connections will probably lead to additional personal and business connections and possibilities.

Fourth, it might help you build your profile and obtain board positions or advisory roles at other firms.

Fifth, angel investing can provide excellent opportunities to learn about an industry and the startup world through real-life experiences that cannot be taught in school. You will have direct insight into current trends in technology by reviewing pitch decks, attending events, and tracking the progress of your investments.

Lastly, angel investing has the potential to bring you significant returns. Just think if you had invested in a company such as Facebook or Zoom from the beginning. If you had put in $10,000, you would have made a million dollars once these companies went public.

Although there are upsides to angel investing, it is also crucial to be aware of the cons. In short, angel investing can be difficult and may result in the total loss of your investment. For example, when you invest in stocks like those on NASDAQ or FTSE, you typically see company values increase over time.

Although the stock market has shown an upward trend throughout history, if you can keep your investment long-term, you will likely see a positive return. Most corporations in the stock markets are mature, established, and regulated. Most early-stage businesses do not survive this far, and there will be few opportunities to exit your investment. In essence, because a failing startup just vanishes when it fails, there is no option to hold your position long-term and wait for the firm to recover.

Keep in mind that It is common for startups only to earn returns in the long term since they have to go through different stages of growth before they can start repaying investors’ exit. Also, liquidity is nearly nonexistent, so it will be tough for you if you realize that the market is changing. However, as a founder during these times, you will likely have more direction than a large company when it comes to handling changes and making new pivot decisions.

Finally, you will experience tremendous aggravation and disappointment on your trip. These may occur in various ways, but certainly, when you cannot locate solid firms to invest in or when your investments, those you thought were the next unicorns, disappoint. You will need to put in the effort to get past these frustrations and learn from each one to become a successful angel investor. We will discuss how to overcome this bitterness below.

The path you pick is one with a lot of unknowns and where judgment takes precedence over analysis because there are so few data points.

Benefits and Drawbacks of Angel Investing

What Are Angel Investors’ Return Expectations?

Angel investors earn a return when they sell all or some of their company holdings at what is called a liquidity event. A liquidity event occurs when a company gets acquired, merges with another, has an initial public offering, or experiences some other type of financial turnaround that allows the original founders and early investors to cash out part or all of their shares.

Although an angel’s objective is to assist a company in going public and raising capital, an IPO or trade sale may come sooner than anticipated. Angels frequently receive the opportunity (or sometimes the obligation) to sell their stake at the next round of funding. 

Here Is an Example of How This Might Play Out

An investor puts $100,000 into a firm in its early phases at a valuation of $1 million. This means they will acquire 10% ownership of the company. The cash will be used to finance the business, develop prototypes, conduct marketing, recruit new employees, and achieve certain goals. As the company develops and requires more funds at greater valuations, it will almost certainly seek Series A financing, for example, at a valuation of $20 million.

In this scenario, the investor would be the owner of 10% of a $20 million firm; that is, they would have shares worth $2 million or 20x their investment.

Depending on the legal paperwork and the terms of the new funding round, angels may choose to leave or keep their shares, which will almost certainly be diluted in the funding round. In Section Five, we will talk about dilution. Dilution is any reduction in a security’s value due to an increase in supply. We have prepared a spreadsheet to help you understand how diversification and successful businesses will generate very high IRRs.

Business Angels Are Not in It Just for the Money–They Want To Make a Difference

Many startups need assistance and direction to make it to the end. Most fail, but some manage to succeed magnificently. When investors first start as angel investors, they are usually unaware of how much influence they will have on these companies’ growth– It is not simply about making a profit. It is only after becoming active business angels that they realize the significance of their role.

Any time an investor puts money into a startup, they should also expect to help the team resolve any issues that will further their progress- this aid is just as important as the initial investment.

As an investor, you must be ready to work for your investment earnings and assist with crucial problems that might arise during a startup firm’s growth stage. If you are not interested in doing so, a full-on angel investing strategy may not be the best option for you at this time in your life. 

This is why it is essential to learn what it takes to become an angel investor before putting money into start-up business ventures that are unsuited to you because of your lack of sector or industry expertise.

Angel’s Duties at a Firm 

Coach and Consultant

Common among angel investors, this type of investment is more than simply financially based; It is also about assisting the startup with their business strategy and direction as time goes on. Most startups have little to no experience in these arenas and need someone who can fill that critical role of guidance. Whether working with an existing company or a new startup, this will be important for any angel investor.

The first thing a competent angel investor will do is offer some coaching to the company’s leaders. This may assist them in identifying issues that need to be addressed and laying out a framework for addressing them. Any support, whether it is testing a product or helping with customer service difficulties, can be beneficial at this point.

Network and Make Connections

Startups often have trouble being introduced to established members in their desired industry. Without a big enough contact list, it is difficult for these young companies to reach out to the appropriate leaders. This is where an angel investor comes into play and provides value.

As an angel investor, you can play a significant role in a company’s success by introducing it to key individuals who could help with its growth or funding. These people might be investors themselves, potential customers, or other influencers who could offer critical advice or assistance.

Trying To Raise Money for a Cause

Angel investors make investments without getting involved with the company’s day-to-day operations; therefore, they must take on fundraising obligations to assist startups when they are short of money throughout their growth phases. Many firms are underfunded in their early days, requiring additional funding to complete their lifecycle and reach an exit event.

Angel investors often take on the role of venture capitalists for businesses that need cash and want to move quickly but do not want to wait for external financiers or banks that may have little experience working with startups at this stage of their development.

Legal

Startups seldom have the financial resources to hire an independent legal counsel or even a company of their own to help them through some of the legal challenges that will arise as they develop. For companies they assist, angel investors may become an important source of legal advice and assistance.

Before investing in a startup company with some of your money, you should consider how much time you have available to commit to these activities. If you are running a small business, you may not have the extra time or resources required to also invest in a startup company’s roles. To avoid misunderstandings, ensure you understand what is expected of you if you decide to become a business angel investor.

It is also essential to set clear goals and measures of success. It will enable you to judge better where and how much money you want to invest. You must be able to do this ahead of time because once the funds are deployed, and you are in an investment scenario that requires more effort from an angel investor than you can provide, It is too late.

Angel’s Duties

What Is Your Angel Type?

Finding your angel profile is a very important first step for anyone aiming to become an angel investor. It is how you figure out what sort of investments to pursue.

Your angel profile might be used to:

  1. Determine the sort of investment possibilities that you are most comfortable working with.
  2. Learn about the many sorts of angel investments and where you are most likely to be tempted.

Consider this: your angel profile may vary as you get more experience in angel investing. As with any profession, the greatest improvement method is to be open-minded and adaptable so that you may rise above time.

What Is the Definition of an Angel Profile?

Your angel profile is an assortment of investing criteria that will assist you in identifying investments that are appropriate for your present state of development. It focuses on the sector or field within an industry in which you feel most at ease.

For example, if you have a background in finance and technology, you might discover that your angel profile is most suited to early-stage technological firms. If you have experience in marketing and consumer goods, you may find that your angel profile is best suited to early-stage consumer product enterprises.

Because we each bring different experiences to the table, every person has a distinctive angel profile. For example, our previous work experience can dictate which deals appear most captivating. In addition, hobbies and personal interests often play into angel profiles since we usually prefer investing in ventures that reflect our skill sets and understanding. Lastly, our personal and professional networks typically guide where we find potential deals and how best to assist the ones ultimately chosen.

As you gain experience and your interests evolve, so will your angel profile. When starting as an investor, It is vital to understand how to identify investment opportunities that fit your current profile. This way, you can learn how to find them through different means efficiently—and without wasting time or money pursuing deals that are not right for you.

How Do You Figure Out What Your Angel Profile Is?

You may straightforwardly create your angel profile.

  1. Consider your past job experiences or other life events, and evaluate them.
  2. Identify the sorts of businesses or investments that pique your interest.

To figure out which type of angel you are, answer the questions below:

What Areas Have You Worked in Before?

After you have taken the time to consider all the areas that interest you, it is important to look back and reflect on those moments or hobbies where you feel as though you shined. 

These are likely the instances when your skills as an angel investor will be most impactful!

For example, let us suppose you have a background in technology. Perhaps you have previously worked for a cloud computing company or big data business. If you are an experienced engineer or software developer, this will be an essential aspect of your angel profile. You will understand the challenges that these kinds of companies are likely to face and be able to ask the founders important questions about them. You will also know what the product market fit may look like in a particular company within this industry, thanks to your experience and expertise.

What Is the Connection Between Your Angel Profile and Your Present Employment?

Examine everything that interests you, and write down those directly connected to your work experience. If you are interested in technology and have a financial services background, fintech investments may be your most appropriate area. You might want to concentrate on growth marketing and influencer marketing firms if you have the most expertise in marketing and sales.

Which Industries or Companies Do You Find Most Interesting?

Reviewing all of the areas of business that interest you, make a note of those most interesting to you. What markets or issues do you feel passionate about?

You might want to examine current global issues, such as 5G, self-driving cars, blockchain, augmented reality, etc. Hot commercial sectors that may provide you with a good return on investment include life science, alternative energy, and no-code software because there is a lot of demand for these products and services in the market, and your startup may be able to compete in them.

If you work in the corporate insurance sector and are interested in insurance firms, your primary angel profile should be focused on corporate insurers. If you are unfamiliar with augmented reality technologies but are intrigued by them, investing small amounts into the business may let you learn while earning a profit.

You are on the right track if you genuinely feel enthusiastic about an industry or technology category. In and of itself, Angel investing may not be worth doing if you do not have passion for the issues at hand.

What Makes a Great Angel Investor?

The greatest angel investors can link a company’s potential with the market and make the correct judgments at the proper moment. Angel investors willing to meet with startup investment opportunities have a greater chance of succeeding than those who just want to stay on the sidelines.

Traits of Great Angel Investor

Entrepreneurship

Angel investors are usually entrepreneurs themselves. They understand how difficult it is to start a business and have compassion for those going through it. They have also had experience with failure and can see when others are taking the same path.

Listening to your intuition is crucial when deciding what investments to make. It will pay off in the end if you can connect the dots and accurately predict trends. Always do extensive research before making any financial commitment, and use past experiences- both good and bad- as learning opportunities.

Finally, because business founders and entrepreneurs are the ones who know best what it takes to succeed, you should be able to trust their judgment and follow it.

Focus Intently

What sets great investors apart is their ability to choose successful investments and focus on lucrative opportunities. They have a good understanding of current market trends and an idea of where the market is headed. More importantly, they are interested in the long-term potential of an investment rather than just immediate gains. This allows them to invest their money into ventures that will make a difference.

Not only can they see the potential investments that others cannot, but they also focus on the big picture. This allows them to take advantage of opportunities that business founders often do not even know exist.

Perseverance

Active investors should be patient and persistent, prepared to wait for results. They also need to commit long-term, even when a company is going through tough times, instead of writing it off. Angel investors often invest in businesses that have already shown some initial success because they know it can take time till the business really takes off. A great investor does not shy away from risk or commitment and sticks to their strategy until they make an ROI on their investment.

Calmness

Because startup investing requires significant time to find the right companies and scale them, a successful angel investor needs immense patience. They cannot give up during the interim period between finding a company and scaling–if they do, they will not achieve their ideal results. Angels willing to bide their time until everything is ready for further investment tend to be more successful in the long run.

Dependable

Angel investors are trustworthy and will do everything they can to keep their word. They will also be honest with the firms they invest in and will not make any underhanded deals that could harm the company’s long-term prospects. They can also build credibility among other investors and start-up executives by earning others’ trust.

Thorough

Investors who are good at what they do are thorough and go to great lengths to satisfy the demands of their businesses. They will comprehend the requirements of the business and make judgments in its best interests. When they invest in a firm, they are prepared to devote time and effort to ensure that it succeeds for both sides.

In conclusion, fantastic investors frequently begin as successful entrepreneurs who can anticipate trends before others do. They recognize how difficult it is to start your firm, so they have empathy for those in need of their assistance. They are also brave enough not to be scared of failure that they are more inclined to invest when others may be hesitant.

They can think quickly and see potential opportunities where others cannot, which allows them to help a business connect its needs with its growth goals.

An Example Route for an Angel

If you are not worried about money, shoot for a high number of companies so that you can find an anomaly. For example, suppose over two years you invest in 20 different businesses–ones with developed products and some revenue coming in. You give each business small allotments from your total net worth pot (we will say $500,000) and save funds apart to put more into the most promising ventures down the line. In this scenario, 10% of your net worth would go towards angel investing; thus leaving $20,000 per company out of a total possible investment amount of $100,000.

Let us suppose that you had your entire assets taken away from you; this would represent a 10% hit to your net worth, which is not ideal but may happen if you are fully invested in the stock market during volatile periods. A 10% loss might be tolerable, especially if you consider investing in high-risk asset classes like startups.

It is also possible that, after a few years, you find out that 10 to 15 firms you backed have vanished or gone bankrupt. Alternatively, they may have been sold (at a loss).

However, if you were fortunate enough to adhere to a solid plan, some of the remaining firms are likely doing well and can cover the losses caused by those that failed. In the startup world, a return of 20x or 30x is not uncommon, not to mention 100x or 1000x, as occurs with unicorns. Even though it may seem like a fantasy, angel investing is all about finding those diamonds that will change the world and deliver out-of-this-world returns.

Investing in Startups for the Average Person

If you want to join the cap tables of startups but do not have much money to invest, options are still open to you. Instead, you could become an advisor or employee, trading your time for equity rather than cash.

However, you do not need to be a millionaire to become an angel investor. According to Angel Investment Network, most firms are satisfied with investments ranging from $7000 to $10000, while some even accept investments of as little as $1000. If you join Angel Investment Network, you can invest in fantastic businesses for as little as $10k or $20k. You may also combine your resources and invest with a family member or friend who wishes to become an angel investor.

It is a good idea to start small and get your feet wet by making a few investments (and mistakes) if you want to be an active angel investor. Once you have gotten the hang of it, you may raise your capital investment as desired. However, there will always be plenty of excellent investment opportunities for investors who are prepared to invest between $10k and $25k per deal. Several methods and structures exist for investing small amounts of money while learning until you have more expertise.

Different types of funding, such as clubs, networks, and syndicates, can be great ways to start your journey painlessly while still allowing you to contribute. You will be able to feel the angel experience more when you join in on these different aspects.

Different types of funding, such as clubs, networks, and syndicates, can be great ways to start your journey painlessly while still allowing you to contribute. You will be able to feel the angel experience more when you join in on these different aspects.

How Much Money Should I Invest?

When it comes to angel investing, many little investments may be preferable to a few big ones. The typical size of an investment made by a busy angel investor is between $25k and $100k per transaction. Most investors are unwilling to make investments totaling more than $100k each deal.

While the average size of a funding round for businesses that obtain money is around $250,000 to $1 million, many investors do not invest such a large sum in a single round, especially at the early and risky stages. Most investors will put between $10k and $25k each deal into an early-stage business before waiting for another round of financing to arrive before reinvesting into the same firm (known as follow-on investments).

How To Get Over the Loss of Faith (and Money)

As the old saying goes, “The best way to find out what someone believes in is to look at their checkbook.”

Many angel investors give up on their investments too soon. They feel like they are wasting money, and become scared of following through by investing in later rounds.

The problem is that they have no idea how to analyze their investments.

They assume that everyone else looks at investments the way they do and, as a result, believe that ROI is the end-all of whether an investment is good or not.

However, that is not how angel investing works.

First and foremost, do not fixate purely on the monetary value of your investment. Money is not always the most important aspect of angel investing; what truly matters is if you believe in the company and its founders enough to invest. Remember that this is a long-term game.

So, we feel that there are a few different ways to look at your investments:

Ways to Look at Investments

Investing as a Learning Opportunity

Your investment should challenge you to develop new skills and ways of thinking– helping you grow as an investor and a person. This is especially true for your first angel investments; that is why we advise starting small.

The true motives for investing in early-stage companies are because it helps with your development as an investor. Of course, there is always a possibility that you won’t make any money back, but if you look at it as a lesson and experience to help further grow, it is worth the risk.

Consider the fundamental qualities that make a good angel as you begin to learn. Consider your technical abilities, sector-specific knowledge, and how you may better read others as you figure out how to learn.

Investments as a Way To Make a Contribution

You may also regard your investments as a means to assist others. This is not to be confused with charity, which are two distinct concepts. For example, when you invest in an early-stage firm, you are assisting the company in development. And by growing, they can create value in their community (they will be able to hire people within their organization).

Your reasons for aiding them must come from your keenness on the product, the matter at hand, and its potential solution. There is also a possibility that you might have financial benefits as well. If you are interested strictly in charitable work or donations, that is okay too. Keep in mind, though, that angel investing should not be mixed with charity. We find it difficult to invest in friends and family because personal connections can get an integrating factor when trying to do research and being diligent investors. However, we think it possible to relate both angel investing and charity under specific circumstances such as this particular case.

Consequently, if you are going to invest in friends and family, consider this investment part of your social capital and treat it like a donation (unless the startup wholeheartedly persuades you). Doing so will sidestep potential problems with your loved ones. And if the startup does well, that is just an added bonus. We will revisit this topic in Section Five.

Your investment benefits others because you are supporting companies that have the potential to create value for society. Consequently, even though you may experience losses, they are worth it. Plus, by assisting these businesses grow, you might also be aiding yourself.

An Investment Is an Experiment in Itself

You can convince yourself that your investment in a startup is an experiment.

It is essential to remember that a startup investment should be considered an experiment. Just like you cannot predict what is under a rock without flipping it over, you will not know if your startup will succeed or fail. However, by taking the time to invest in startups with high potential, you increase your chances of success.

A great example is Twitter– it started as a side project for Jack Dorsey, Evan Williams, and Noah Glass. They had no clue where the company was heading, but they could see its potential, so they kept pumping time and money into it.

Ultimately, the best mindset to have with investments is one where you do not think about them purely in monetary terms. While this may seem counterproductive, It is important to remember that an investment is more than a simple transaction. Your investment provides learning opportunities and allows you to help others while also serving as your own personal experiment. Though there is no guarantee of success, the rewards can be great if you diversify your portfolio and invest time and effort into researching potential options.

Angel Networking

In this section, we will explore various methods of networking with other angel investors and startup founders. By networking, you lay the foundation to start and develop your journey as an angel investor while building your name and sourcing the best startups.

When beginning to angel invest, you must have a supportive network of people you can rely on. These individuals should have more experience than you in the field and will help your growth as an investor. In angel investing, power and leverage come from knowledge. Also, taking the time to learn from other investors’ mistakes instead of making them yourself will save valuable resources such as time and money.

Keep in mind that developing a solid network of angel investors takes years to develop an ongoing process. You do not need to contact everyone in your network daily or weekly. Just let them know why you are reaching out and what you hope to gain from the conversation. These types of interactions will be more beneficial if they focus on both seeking investment opportunities and exchanging advice/knowledge.

A Guide to Beginning Your Journey as an Angel Investor

It is beneficial to have a broad understanding of how angel investing works before conversing with other angels and founders. Although we will go into more detail about each step, later on, do not worry if this section feels like too much information at once.

In building a portfolio, the angel typically goes through a cycle similar to the one described below. You will first need to build your funnel, a flow of companies and startups that will be fundraising. This can be done through a syndicate or your own contacts. 

The funnel can be extensive or limited, but the idea is that you have enough to compare companies, founders, and pitches to distinguish one company from another and make up your mind about which ones are good and which are not.

The next thing to do is weed through your list of potential deals. This includes skimming pitch decks, talking with founders, investigating the industries you want to get into, and requesting references from either companies or people who have already founded something. Your objective is to find those little slivers of opportunity that nobody else has noticed yet. Try searching for chances that offer a high return on investment while having low (comparative) risks and also matching your criteria for what makes a good investment in the first place.

The task of conducting due diligence on a firm is considered dull, but it is essential if you want to catch the right fish. Verifying what founders claim in their pitch and financial models is important. Due diligence might take anywhere from 2 to 200 hours, so take your time as you begin your path.

The basic issue to consider is whether you can negotiate a better price for the company. You could do this by demonstrating how much of a difference you would make in terms of revenue, growth rates, and market share if the company was sold. If your plan counters their counter-offer, it is time to bargain again! The court may enforce an arbitrator’s decision on appeal, preventing lengthy fights over legal technicalities while retaining important protections like confidentiality and due process rights. -> It is time to sign the term sheet once you have completed negotiating a higher purchase offer for the firm. Consider things like how many percent of the firm you will be purchasing. How will your shares be diluted when there are additional financing rounds? How can stock be liquidated? What are investors’ rights, and how will they be protected? Who will run the company and notify investors? Will there be a board of directors? Will an angel sit on it? We will look at term sheets in Section Five.

After the term sheet is negotiated, both parties draft a legal agreement covering more potential scenarios than the term sheet. These documents are usually lengthy and are written by legal counsel (usually funded by the company or venture capitalists). For smaller angels, these agreements are not often negotiable. The process comes to a close when both parties sign the legal documents and transfer funds.

If you choose to invest through a syndicate, the process is slightly different than if you are investing as an individual. With a syndicate, the fund organizer must reach certain fundraising minimums and allocate funds accordingly. Plus, startup documentation is not signed directly by investors– instead, It is signed by an investment vehicle created for this transaction. It is also probable that contact with the company will be limited if going through a syndicate. In this case, the leader in charge of the syndicate would be your point of reference.

Determine how much you are willing to invest and the capacity in which you want to angel invest. Secondly, find what types of companies particularly strike your interest. You can always change these goals and amounts as time progresses and you gain experience.

Your Investment Ability

Your investment capacity is how much money you can put towards angel investing in total.

In this number, you should include your liquid cash, bank balance, and portfolio holdings. Any other intangible assets you have that are not already listed may also be included here. Your capacity should be big enough to accommodate your investment initiatives and your corporate decisions. Knowing how much you can take on is critical so that you do not wind up stressed over how much money you should invest in each firm. It will also benefit your mental health since angel investing should never pressure your financial situation.

Your investment capacity is not just the money you are willing to invest. It is also the time and effort. This involves activities such as checking your investment periodically, going to meetings, and doing research.

This is only meant to show that you should make decisions that align with your capacity when it comes to investing.

The Quantum of Investment

The amount of money you are comfortable investing in each startup is what we call your quantum of investment. This number can differ for every company, but some investors recommend equalizing investments as much as possible because many will result in random return outcomes. Allocating a different amount to each company may feel frivolous when comparing investible startups side-by-side.

For example, a fantastic place to start is to set aside a specific amount or a percentage (for example, 10%) of your liquid net worth. Assume you have $2 million in liquid net worth and wish to allocate 10% of it to angel investing to earn $200,000. We will get into investment techniques in further detail below.

The startups you invest in will be determined by what your goals are. For example, if you are looking for a startup where you can have a lot of impacts, it might be best to invest in ones that are valued at less than $500k. That is because these startups are usually in the early stages, have lots of room to grow, and do not have many people invested yet. So your role could be bigger than it would be in other companies.

After you have had a few experiences, you may decide to invest in bigger businesses or not. The benefit of investing in larger firms is that they are more stable and have more cash reserves and bigger teams on average.

To put it another way, due to the lower burn rate, they can have a bigger influence on the world with their product, service, or cause. These businesses, however, face distinct hazards than small firms due to a faster burn rate. There are also more rivals at later stages, which may steal their market share. Of course, since valuations are typically higher for these companies, you will receive fewer shares for your money.

Choose an amount that you are comfortable with. If you do not invest enough, your impact will not be very significant. On the other hand, if you invest too much and the company fails, you can lose a lot of money, time, and effort. Only make investment decisions that are right for you and that make sense to you – do not let anyone pressure you into investing in startups simply because they seem like a good opportunity.

You are likely familiar with popular TV programs such as Dragons Den or Shark Tank. In these shows, potential investors often ask for high percentages of company equity to make the investment worthwhile from their perspective. This is partially because they usually take an active role in helping the founders and because having any of these sharks or dragons associated with your company can be a valuable asset. However, keep in mind that the average angel investor check will not provide you with substantial equity- so do not expect to own the entire company!

Your Strategy for Investing

Your investment approach, which is often referred to as a stock portfolio, sets how many firms you will invest in at once and how much money you will put into each. There are two distinct strategies that we have seen: investing in many firms or investing one company at a time.

You can also choose whether these investments should be the same size or varied based on the startup’s risk level and your feelings about it. Many investors prefer to start with one or two investments in their first year and see how they perform before making any scaling decisions. 

You can invest in a wide range of businesses, depending on their apparent risk level.

After you have decided to go forward, the next step will be to identify suitable firms for investment. This is perhaps the most challenging stage of angel investing because it necessitates a thorough grasp of an industry or futurology.

The best way to discover excellent founders and successful companies is by networking and making yourself known to the entrepreneurial community and investment community, whether you are an expert in anticipating future trends, requirements, or goods. Finding great initial deals will be difficult; however, as you improve your skills and become a market leader, many doors will open for you. Your experience here will influence where you invest and where you do not.

Getting To Know Startup Entrepreneurs and Other Angel Investors

Networking is essential to expand your experience, knowledge, and assets. This does not mean aimlessly meeting random people; if you want the best deals and to be well-known, you need to focus on your time. It is great to have a target of meetings; for example, professionals 

should do twenty 30-minute meetings every week, which equals ten hours out of their week. Part-timers would halve this number.

What we are encouraging is for networking to be both fun and beneficial. When you talk with like-minded people about topics that interest you, you will make the best use of your time. Think of it as meeting some of your favorite people, colleagues, or friends for a chat. It should feel natural and relaxed. Do not try to super-efficiently use time with a strict agenda and timeframe because this harms the relationship-building process.

Do not be disappointed if you feel like many of the meetings are a waste of time. Many relationships develop over the years. Even if the individuals you are meeting with do not have anything fascinating for you right now, they may call you in the future with more interesting information or startups.

But, meeting individuals also has to be beneficial, so you must ensure that whenever you meet someone new, you are learning something valuable about your career or investment journey. 

Use questions to help you grow your technical and soft skills. Also, offer relevant information and counsel to those you meet if feasible. Of course, networking is a two-way street; many angels view it as giving first.

Getting Started

New angels should aim to meet both other angels and startup founders. Experienced angels can offer lessons and access to their deal flow, while startup founders will provide potential investments. Prioritize your meeting goals and be conscious of what you bring to the table; before agreeing or suggesting a meeting, clearly understand its purpose from each party’s perspective. To make the most of your time, we suggest 30-minute meetings that can be cut short if there appears to be nothing worth pursuing, with follow-up appointments as needed for promising topics discussed.

Before each meeting, we recommend researching the person in advance. You can look them up on LinkedIn, Crunchbase, Angellist, or Pitchbook. If they are a founder, take note of their previous places of employment and how long they have been entrepreneurs. For investors, try to find out what kind of investments they have made in the past. Checking Google News is also helpful in seeing whether the person has been featured. Always keep an open mind when researching someone; sometimes, people are not quite who you expect them to be.

As you meet people, you will get a sense of the most typical subjects discussed. Meetings usually start with small talk, during which you can learn about how others communicate and discover things you have in common.

Starting with Zoom or any other online conference service is a fantastic place to begin. You may conduct video conferences from the comfort of your home without traveling or spending too much time. We will get into how to discover individuals shortly; there are several options. Money on its own draws attention, and as you develop your profile, you will also attract people for additional reasons.

Breaking the ice at the start of a meeting by asking questions related to their occupation creates common ground and understanding. For example, you might inquire about their work arrangements, office set-up, how long they have been in their role, where they reside, etc.

Then you can go on to the main subject of the meeting. When meeting a founder, you would generally go through a pitch deck, and It is very helpful to read it ahead of time so that you may have your questions prepared (we will  cover how to prepare for meetings with founders in Section Four). The agenda is more open when meeting other angels, and adding value by offering a few firms that you believe they would enjoy is an excellent method to do so. If they understand the market, they might even give them their opinion of them.

Where Do You Go To Meet People?

Places to Network

Next, let us talk about different places where you might meet new people.

At Launch Events

Attend startup events if you want to meet new business owners. There are several events where startups may pitch, such as startup grind gatherings or Angels Den. Attend events in your area to meet some startup entrepreneurs and angel investors. This will allow you to pick up a few business cards, have a few drinks, and mingle with some fascinating individuals. Startup Weekends (hosted by Techstars) is one of the most popular startup-related events.

At an Accelerator, Incubator, or Startup Studio

You might be wondering what the distinctions are between these services.

There are many accelerator and incubator programs run worldwide, such as TechStars, 500 Startups, StartupBootcamp, AngelPad, and Seedcamp, to mention a few. Although some of these provide startup funding initially, they are always eager to show their companies seeking investors who will follow through and invest in them.

Even though it may appear to be complicated, connecting with these systems is simple since there is a learning curve when it comes to deciphering the abbreviations and jargon used in this industry. When you go to one of these areas, it may be chaotic because many youngsters are rushing from one area to another.

As a mentor, you can reach out to one of these programs and provide your experience and feedback to startup companies without commitment. By assisting the startup, you also get to assess them. The founders will be more relaxed around you because you are on the same team, so you will see how they take feedback and how adaptable they can be. If you like them, you can offer to invest in their company as a surprise. However, if you decide not to pursue working with them further, which is most likely the scenario according to program leaders, at least you have given some valuable insight along the way

One of the benefits of working with accelerators is that you get a higher quality pool of candidates to choose from. They tend to weed out the bad apples, which saves you time and energy in the long run. That being said, they are not perfect, and great candidates can still slip through the cracks.

At Business School

Business schools are a great place to find startup entrepreneurs. If you have an MBA, there will almost always be entrepreneurship organizations and alums working on innovative projects. Alums of business schools may be a valuable source of deal flow, especially if you know how to contact Ivy League institutions.

If you are looking for knowledge and have not had the opportunity to attend a good business school, then a great idea is to register for a short course. This will give you access to alumni networks which can be extremely beneficial.

Most top universities provide these sorts of classes for less than $5,000. Harvard, for example, has an Entrepreneurship Essentials online course that costs $1,050. There is a lot to explore and take advantage of; however, we advise signing up for offline courses since they offer many networking possibilities. They may be more expensive but will quickly produce excellent connections and friends.

At Meetup Groups/Conferences

Anytime you attend a conference or meetup, it is an excellent opportunity to meet investors in person. If you are planning on going to a conference, do your research beforehand and make a list of attendees that potentially match what you are looking for so that you can connect with them at the event. Many conferences have different tracks depending on interests, so only go to the relevant ones to prevent wasting time. For example, if fintech is something you want to explore more, there are several smaller but specific conferences related to retail banking, lending, etc.

LinkedIn

LinkedIn is a superb platform if you want to expand your professional network with other individuals in the startup industry, such as angel investors. You can conduct searches for these professionals by using LinkedIn’s search function. Thanks to their filtering capabilities, the site makes it easy to connect with others who share your interests and niche.

Angel investors are individuals who provide money to startups in the hopes of getting a return on their investment. Some will self-identify as angel investors in their profiles, while others may include their angel investments in their work history. People with a full-time day job can be more fascinating than full-time angel investors since they demonstrate that they are still highly productive. You might also wish to look at what other people search for regarding this profile;  you might discover others along the way.

It is also smart to join organizations interested in angel investing, particularly if you are from a specific area or have attended the same business school.

Although we believe LinkedIn is an excellent tool, keep in mind that many individuals receive many invites to network on LinkedIn. As a result, the only way to catch someone’s attention is to have a direct or indirect link to them, otherwise risking never receiving a response. People you two know can provide connections. You may have studied alongside without knowing or have similar views on an issue you have both been studying about. Try your best to obtain introductions or make the invites as personal and tailored as possible for you to receive more replies.

In any case, many individuals will not respond to your messages, so if the individual is or appears to be the person you are looking for for some reason, keep at it.

You can also find interesting names on AngelList and LinkedIn, making connecting with them easier.

Adding Value as an Angel Investor to Startups

In this section, we will discuss more about life as an angel investor, but providing a benefit rather than simply money is an important component of angel investing. It is common knowledge that startups need cash. As an angel investor, you must ensure that you provide more value than simply money to the table.

What to Offer as an Angel

Sales and Marketing Expertise

The startup has an idea. They might have a good product or service, but It is not taking off as they want in the market. They cannot get enough traction to raise money. As an angel investor, you can help them out by bringing your business development experience and connections to the table. You might know some fantastic people that could be customers or have suggestions on how they could better price and sell their product.

Strategic Advice for Entrepreneurs

The business has a strong product or service, but it isn’t gaining enough traction. You can assist them as an angel investor by providing them with your strategic insights and guidance. This might be product management expertise, logistics expertise, operations experience, or anything else that will help the firm get operational.

Professional Guidance

Sometimes startups do not necessarily need funding, but they might require assistance with operational decisions or hiring choices. As an angel investor, you can provide professional guidance and industry contacts that may benefit them.

You might know individuals in your industry who could be of assistance, or you may have excellent solutions for certain business issues. This sort of coaching will be more useful if you have worked with or invested in other businesses and if they want your advice on how to accomplish something similar in their firm.

Industry Analysis

Startups might want tips on how to improve various aspects of their business. For example, improving customer support or learning how customers see their product.

Introductions

An entrepreneur has no money, but they have a fantastic concept and are looking to raise cash. As an angel investor, you may provide them access by introducing other angels or venture capitalists. You might know other investors who might be interested in hearing their pitch, or you could possibly introduce them to some potential customers who can see the product’s potential.

This may be true if you focus on a specific location or topic and begin co-investing with other friends and coworkers. According to popular belief, angel investors are essential for a company’s survival throughout the subsequent funding round; thus, connections may play an essential role in completing the next investment round faster and more efficiently.

One important way angels help startups is by introducing them to key contacts who can help get their products to market or connect them with relevant decision-makers. This could involve helping the startup secure necessary tech, parts, or software contracts unavailable to everyone or promoting their product on a relevant platform.

Creating Your Profile on AngelList

The angel profile is a narrative of your investor’s professional background. You should emphasize relevant accomplishments and assets that might benefit businesses and qualities that make you appealing.

Some people refer to it as an angel CV. Its goal is to establish you as a genuine and trustworthy individual in the eyes of possible startup entrepreneurs searching for financing. It is also a method for other investors in the same fundraising round to learn more about your area of expertise and abilities that will help the firm grow. Everything comes together in a positive cycle.

Your angel profile should be brief and to the point, living in different places. Because the angel market is so competitive, investors who cannot communicate their experience succinctly will most likely not invest in your venture, only investing in what’s left over. Consequently, being clear and concise from the beginning is critical for success as an angel investor.

You may go through hundreds, even thousands, of deals without seeing anything worthwhile. Even if you see a lot of wonderful offers, if they’re turning you down or you do not get to see the good ones, you will wind up with an inadequate option. It is similar to going to a restaurant; if you visit a bad one, no matter how many different dishes they have on the menu, you will most likely not find a really exceptional one. However, if It is your first time at a Michelin-starred eatery and just one selection is available on the menu, you can be confident that whatever it is will be quite unique.

AngelList (Angel.co), LinkedIn, Crunchbase, and PitchBook are the most popular platforms for startup investors to share their biographies. Some of these networks allow entrepreneurs to create lists of individuals who have invested in a certain specialty. In addition to sharing their views on any number of topics, many angels also have their own websites where they can control the amount of information investors can access about their investments–including failures. While it may seem contradictory, this is incredibly useful for startups and investors alike as these Failure Stories convey key learnings from past mistakes. 

A few key items to include in an angel CV are:

Angel CV Inclusions

Companies in Which You Have Invested

If you have invested in startups, list the companies here.

Naming your firm, the size of your first investment, and the date you made it are all important details to include. This is a fantastic method to display your value and trustworthiness as an investor. If you have access to this information, you may also show how much money each company has earned or lost after investing in it. However, bear in mind that other investors may not find this data very useful when assessing your credibility.

Do not be alarmed if you are just getting started; all angels have been in your shoes at some point, most likely when online information was not as readily available. As a result, you’d need to draw attention to aspects of your investment or business career that were previously neglected.

Investment Experience

So far, what experience do you have as an investor? If it is limited, that is okay. Even if you have only invested through a syndicate or crowdfunding, list the companies you put money into.

By possessing this knowledge, you have an advantage over other investors who have zero experience or only limited information about startup investing. This demonstrates to others that not only are you willing to learn more and develop your skills as an investor, but also excited to gain new abilities in this particular area of business investment. Furthermore, it illustrates to potential business partners and startups that even though you may be lacking experience, you are still qualified enough to invest in their company–decreasing the risk for them overall.

Exits or Profitable Investments

This is vital information for any potential business partner or startup founder since it demonstrates that your investment had a big enough impact on the firm to result in a greater sales price than it was worth when you first invested.

Professional Work Experience in the Field

List any large-company experiences you have had, especially if you were in a senior position. This conveys the idea that you can collaborate with and add value to major enterprises to your potential business partners and investors. It also demonstrates that you have strong ties with other experienced individuals.

Appropriate Training

List your educational history and any degrees or credentials you have received or earned. Having a degree or certification demonstrates that you are competent enough to understand certain topics, such as investing in startups and business management, and that you can effectively communicate your expertise. If feasible, include the discipline of study for each degree or credential.

For example, if you have an MBA from Harvard University in finance, this will demonstrate that you have a high level of education in financial and investment-related subjects, which is essential because these skills are critical to investing successfully. The higher degrees and certificates you list, the better. Higher education also has a direct relationship with networks; as a result, others will know what your network is and whether they can assist in obtaining introductions.

Extra-Curricular Activities

Extra-curricular activities and hobbies that demonstrate your leadership skills or knowledge in a certain area will strengthen your application. These may include starting your charity, being on the board of directors for a local non-profit, or writing for a blog.

A passion for helping others is always impressive, proving that you would be an excellent investor. Maintaining focus on your goals while learning about different topics and engaging with the community is also key to success as it establishes your reputation as someone who helps others reach their potential.

If extra-curricular activities are linked to the sectors or markets you are interested in, include them. If you are a big LOL player and have a passion for internet gaming or e-sports, be sure to note it even if it doesn’t seem relevant. There are huge industries entirely new for seasoned investors but nonetheless exploding in growth, so younger, less experienced people can provide a lot of value.

Experience With Startups

If you have prior experience working with startups, include it in your profile under this heading. Give a complete list of the firms you have worked for or invested in, even if you were an employee rather than an investor. Include the firm’s name, your title, and the length of time you spent working there. This info indicates to investors that you are experienced with startups and understand how they function, which is crucial when considering investing in a company. If applicable, list the startup’s performance post-your departure or lack thereof involvement. This showcases that your work positively impacted the company’s productivity after you were no longer involved operationally.

This is particularly true if you have been a mentor directly or through an accelerator program or a director or advisor of the businesses. It also has significant value and may be used as a source of information for the company’s future stages and for other investors trying to learn more about who you are.

Sweet Spot or Investment Thesis

An investment thesis is a well-reasoned argument as to why you believe a particular investment will outperform the market or other similar investments. You may hear other angels talking about their investment thesis, and founders may ask you about yours. This pairs up nicely with your angel profile.

In Silicon Valley, It is not unusual to see equally capable firms come up with very different conclusions. These can range from passing on a deal to providing a wide selection of term sheets. These variances are due to the fact that each venture firm’s investment thesis is determined by its corporate rules, which govern partnership investment decisions.

Every trader should have a thesis for their investment. It is what influences their investing strategy and is influenced by several factors. Any competent investment company will almost certainly use an internal language to discuss prospective investments with each other in some depth. It is an indication of having a strong sense of purpose.

How To Promote Yourself as an Angel

You may think that marketing yourself as an angel is not required, but you were incorrect. If you want to join the angel network, you will have to market yourself. The first step is to get your name known. Make sure people are aware of who you are and what your interests are. You might wish to establish a blog if you do not already have one.

An online presence allows you to reach more people than other marketing methods, giving you access to better deals.

If you are searching for a bargain, chances are you will find it online at first. Deals do not fall from the sky. You will need to seek them out; the ideal place to look is on the internet. This is why you should establish an online presence so that people can know who you are and what you are looking for.

Unfortunately, some of the most profitable investment opportunities are not available online, and it is often too late when they become public knowledge. You will need to be vigilant in seeking out these sorts of opportunities through your extended network.

Self-Marketing Both Online and Offline

There are two main ways to get exposure as an angel investor: online and offline. You can reach the widest possible audience by having a presence in both arenas. If people know you only from your online activities, they may be aware of your investment portfolio but less likely actually to invest money with you. However, if you have strong connections offline (i.e., through personal relationships), that can lead to significant investments even if your online presence is not as well-known.

You must be able to reach out to everyone you meet and offer them the opportunity to work with you or invest in your opportunities. Offline connections can also assist, especially if you can get on TV, such as Shark Tank. Think about how well-known entrepreneur Marc Cuban is after appearing on Shark Tank.

Marketing and networking are similar in that they require effort to succeed. Networking is more personal, while marketing covers a more significant number of people. Here are some of the best ways to market yourself online:

Promoting yourself as an Angel

A Blog About Yourself

Angel investors like to talk about themselves, their hobbies, and their investments on the internet. You may do the same and see how your following increases. Make sure that your language is simple and fast to comprehend. Also, discuss keywords that you are interested in investing in and your passions. Check out Brad Feld, Jason Calacanis, Christoph Janz, Martin Varsavsky, Tim Keane, Naval Ravikant, and Fabrice Grindafs blogs for some inspiration if you need it.

Social Media Accounts

Adding social media to your marketing strategy is a great way to reach more people. You can use platforms like Twitter and LinkedIn to share your thoughts and articles, which will help spread your ideas quickly.

This can help you acquire more followers, which might assist promote your company or investment interests. There are many people on Twitter and LinkedIn, and It is beneficial to join a group with your angel pals so you can follow their postings, like them, and stay in touch.

Other social networking sites, such as Facebook, Instagram, or TikTok, may have distinct audiences, but they can easily replicate the material you post elsewhere. Dan Martell’s angels would surprise you because he has over 500,000 followers on TikTok!

Web Directories for Angel Investors

There are several internet directories where you may discover angel investors and their investment criteria, deal sizes, monetary targets, and other information that might be useful while searching for investors. These can also help you figure out what kind of connections you already have with other angels online so that you can explore potential deals that appear on the internet but lack any investor interest. Angel.co is, without a doubt the most well-known angel network on the internet, making it an important location to start your profile.

On the other hand, there are always options for offline marketing:

Startup Activities

As an angel investor, you should consider attending startup events to listen to pitches and act as a judge. This will help establish your investment interests and brand and allow you to invest in other startups or become an advisor or mentor.

Joining an Angel Investing Club

You can join an already existing angel club or create a local one if there are none near you. This will help expand your network of people with common interests and allow you to access more investors and opportunities.

What Is Your Angel Niche?

In business, there is a lot of talk about your sweet spot or area of expertise. But what exactly does this phrase imply for angel investors?

The sweet spot or niche is where you can simultaneously be the most content and successful. It is the intersection of your skills, passions, and goals. If you have spent a large portion of your career in one industry and enjoy it, then that will likely be your sweet spot.

The angel investor’s sweet spot may be various for each person, depending on the circumstances.

Angel Niche

The Sector, Industry, and Geographic Location.

Many angel investors are interested in a certain sector and enjoy working with firms in that industry. For example, an angel investor enthusiastic about the Internet may be more interested in SaaS companies. Dan Martell, one of Angel Investor School’s ambassadors, has a strong interest and has chosen to become one of the best coaches and investors in SaaS firms. He now leads and is really successful at scaling and growing SaaS businesses, so the greatest founders and entrepreneurs go to him directly in this area.

The niche you select may also be influenced by geography. Some angels believe getting to know a certain nation is difficult if you do not have boots on the ground and have not worked or invested in the region before.

Although it is not essential to know the area, and you may have significant interests in a region you do not understand, striving for a location familiar to you will most likely result in access to the greatest companies. It will be more challenging to locate the best deals and demand a lot of time and money if you dive into an entirely new realm. It will most certainly become a steep learning curve that will cost a lot of money and time, so think carefully about the territory and geography before making your decision.

Company Stage

A company can pursue funding in a variety of ways. Angel investors interested in assisting companies looking for venture capital financing may concentrate on angel investments to help fill the gap between an entrepreneur’s first round of funding and a VC round. Other angel investors may specialize in later-stage companies that have received some venture capital but need more to develop and expand successfully.

Startups attract angel investors because they Germaine a new, unique idea but need monetary gestation to bring their project to fruition. Later-stage companies that have traction and are growing steadily also draw in angels; however, these types of investors focus on how to help the company rapidly develop and expand.

Financing Stage

The stages for a startup seeking financing include (but are not limited to): seed or pre-seed, series A, series B, series C, and beyond, all the way to IPO. Although most angels specialize in the early phases of development, they can nevertheless contribute value (and investments) to businesses by remaining on the board and following through. The timeframes for each phase may differ significantly depending on whether the money is raised through an investment round or a loan.

An angel investor who is mainly concerned with assisting firms in raising series A or series B rounds may focus most of their efforts on deal flow for those rounds. An angel investor interested in pre-seed or seed investments will spend more time developing connections with prospective entrepreneurs and learning about their ideas to see if their business fits with the angels’ interests and capabilities.

Size of Investment

Angel investors may be attracted to investing small amounts of money (such as $20,000 or less) or larger amounts of money (such as $1 million or more). This is influenced by the angels’ financial situation, access to capital, appetite for risk, tolerance for deal flow, and the startup’s stage or financing round.

Type of Investment

As an angel investor, you have many options to choose from when it comes to where you want to put your money. These include debt-based and equity-based investments, which we will go over in more detail later on. If you are interested in a debt-based investment, this might mean lending money to a company that needs just enough financial assistance to stay afloat until they make some profit.

The majority of angel investors are focused on assisting firms in raising equity financing rounds. Angels will typically invest money and get stock or equity, but there are situations where convertible notes give interest or dividends. This is determined on a case-by-case basis.

Internet Networks

The following online resources can help you build your network:

The most famous angel investor school is also the largest. The annual free virtual summits bring together the greatest angel investors in the world. Angel Investor School offers specialized 1:1 training, intensive angel programs, and online training, as well as useful resources for beginning angel investors. There is also a lively social media group to exchange and discuss ideas and an active LinkedIn page where you can post ideas and comments.

AngelList is the world’s largest online angel network, founded in 2010. The platform exists to level the  playing field for startups when it comes to fundraising and talent acquisition by making investment more accessible.

If you are looking to get into angel investing, AngelList is a great place to start. You can find experienced investors who are willing to syndicate with you, and some of the best angels and startup founders in the world have their own syndicates on AngelList.

SyndicateRoom: Invest in UK early-stage companies as a component of a fund managed by our ambassador Tom Britton.

The TechCrunch Startup Battlefield is an online competition for startup businesses to network with one another.

Meetup: Meetup is the perfect platform for networking with people who share your interests. Find a meetup group in your city and attend events to meet entrepreneurs, investors, and mentors interested in startups. Angels have especially taken advantage of this option by setting up their groups without investing any money into technology.

Our ambassador Brad Feld conducted an experiment called Startup Communities. Utilizing Mighty 

Networks technology, It is an app that lets people talk about startups, investing, and other topics. The Angel Investor School channel is definitely one to watch!

If you are interested in participating in a weekend-long event that helps entrepreneurs kickstart their early-stage companies, then Startup Weekend is for you. You can register as a team member, mentor, or volunteer on the website and gain access to an extensive network of fellow entrepreneurs, investors, and mentors from your city or region.

Crunchbase: Crunchbase is a database that contains information on tech firms, people, investors, and events. It is an excellent place to learn more about companies and their founders, as well as investors and rivals.

Although it might be costly for some angel investors, PitchBook is a database with detailed information on startups and investors of all sizes.

Online Resources

Increasing Opportunities

As an angel investor, a consistent flow of new investment opportunities is essential to success. Networking is vital in this role, and though it may be more art than science, with the right skillset it can efficiently resolve any issues. To increase your chances of investment opportunity , some recommend investing in 1 out of 100 deals .That is not to say you must interview one hundred firms; instead, you may start by eliminating all of the pitch decks you get based on how well they match up with your investing thesis.

Consider partnering with angel investors you know to get involved in their deal flow and potentially make some profits together.

Use social media to your advantage: By LinkedIn and writing content as an investor, candidates will reach out to you instead.

We will get into that in detail later, but for now, know that you can use syndication to leverage your blog. We will discuss the topic further in its own article. For now, all you need to know is that a syndicate is a group of angel investors who pool their money together to invest in the same startup. While investing in a few syndicate transactions, you will notice that you are investing with other people. This may be used as an icebreaker to begin a relationship and share deal flow.

Investing on the internet provides a wealth of options. There are several online investment sites to choose from, including AngelInvestorNetwork, which has listed more than 1,000 companies in need of funding. You may also look at websites such as Kickstarter and Product Hunt to see whether you can get in touch with firms you like directly.

Conclusion

Angel investing is a high-risk, high-reward proposition. The best way to increase your chances of success is to diversify your portfolio by investing in a number of different companies in various industries. 

Additionally, technology has drastically changed the landscape of investing, and there are more opportunities than ever before to get involved in early-stage companies. By utilizing online resources and networking, you can increase your chances of finding investment opportunities that match your investing thesis.

You should also have a solid understanding of the business and management team before making any decisions. 

Finally, don’t be afraid to ask for help from experienced angel investors or mentors. With the right guidance, you can minimize your risk and maximize your chances of finding the next big thing.

FAQs

Angel investing is a type of private equity investment made by wealthy individuals, typically in startup companies. The goal of angel investing is to generate high returns, though there is also a higher risk of loss compared to other types of investments.
Some of the potential benefits of angel investing include the ability to generate high returns, the potential for social impact, and the opportunity to mentor and support startup companies.
As with any investment, there is always a risk of loss. Angel investing is considered a high-risk investment due to the early stage of most companies that receive funding. There is also a risk that the company will not be successful, which could result in the loss of the entire investment.
Networking is extremely important for angel investors. The ability to connect with startups, other investors, and mentors can be critical to finding deals and supporting early-stage companies. Online resources can be a great way to increase networking opportunities.
Some tips for becoming a successful angel investor include networking, building relationships, and utilizing online resources. It is also important to have a clear understanding of the risks involved and to carefully vet any companies before investing.

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, or check out his speaker profile on the CFA Institute website.