So you thought you might try your hand at angel investing now that you’ve made your millions, as part of ‘Alternative Investments’ in your quest for portfolio diversification? Now that you’ve formed your own ‘Band of Angels’, wouldn’t it be nice to know how those successful angels do it and increase their odds at investing in budding startups with the potential to earn that 50-to-100 times return on investment (ROI)?
I had the fortunate of receiving the wisdom of a highly successful entrepreneur-turn-angel investor, and promptly distilled his (and his band of angels’) collective wisdom and investment mantra into the following:
- Walk the Talk!
Be sure you can bring value to them startups and add significant value, be it through your personal network or past experience. Otherwise you’re probably better off investing in fixed income instruments, or take that $100,000 and buy 100,000 lottery tickets – the odds for a higher return would probably be a zillion times higher.
- Minimize Risk (duh)
- Low Cost of Development = Low Cost of Failure
- Invest small sums, minimize your exposure and stretch your dollar so that you can have more ‘chances’
- Skip startups with entrepreneurs who don’t know how to let go – these same founders will give you hell later on when the time comes for a different management team to bring the venture to greater heights
- Nothing but the Best
The first big hit’s always the hardest – once you have it in the bag, the next logical step would be to hang out and pally with top-tier series-A venture capitalists and earn their respect. Nothing is better than starting a bidding war going on between Accel, Sequoia and Benchmark to drive up the premium on your hot exclusively-angel-funded startup.
Anything less than the above and you shouldn’t even bother putting in your time~