Angel investing is becoming more and more popular with investors with less and less experience. This is a great formula for disaster. With not so recent regulatory changes, angel investing is becoming available to the masses. During the dot com boom there was a flurry of accredited angel investors who lost a lot of money and just gave up. The reality is that while these angels were smart and had the money to lose, they were just following their buddies they met at their country club and didn’t take the time to develop a strategy.
Remember this: It’s ok to lose money on an angel investment when it fails. It is not ok to lose (or get minimal return) when a company is successful.
Yes it happens. Here are some tips on why you should have an investment thesis prior to writing a single check.
- A well thought out thesis allows an angel investor to develop a deeper understanding of the risks/opportunities of an investment.
- If communicated well to the entrepreneurial community, deal flow will move towards quality vs. quantity.
- You can create an expert network to support your due diligence efforts.
- Develop a network of friendly VCs that will work with you for ongoing rounds. Less susceptible to getting crammed down.
I will be holding some workshops to help out both novice and experienced angels alike. These are hands on, so be ready to think hard and work hard. I’m calling them Angel Investment Accelerators and am partnering with wealth managers, financial advisors, etc. that want their clientele to be better educated to take advantage of the opportunity to angel invest. Worst case, you decide it is not a fit for you.