What attracted you to exploring angel investing?
Investing in startups seemed like it would be a lot of fun and it has been. I get to search for good opportunities then dig in to make an assessment of whether or not they have a decent chance of success. Angel investing gives me a platform to invest in meaningful companies, meet interesting people, learn new things, and hopefully make money.
If you’re still angel investing, where do you find most of the companies?
Networking, networking, networking. Through various friends and acquaintances, I have been able to connect to companies and groups to get pretty good deal flow. SAC was a good starting place. If anyone knows of a good company, let me know!
What are the top three things you look for in companies where you invest?
- The team has to be awesome. That doesn’t mean that they won’t have flaws or gaps but they need to be passionate, competent, and coachable. If they can’t execute or hire the people who can, they will fail for sure. It’s hard enough even with a great team.
- The product or service has to solve a problem and someone has to be willing to pay for it. Also, it has to make sense to me. If I don’t “get it”, I don’t buy it.
- The business proposition needs to give me a return that is worth the risk. I’m shooting for an IRR of at least 25% across my entire angel portfolio.
How did you incorporate angel investing into your overall portfolio?
I’ve always had a portion of my portfolio be high risk. Startup companies are now a big part of the high risk portion. Because there is also the possibility of high returns, I put much of my angel investments into a self-directed Roth IRA.
What have you learned since you started angel investing?
No one has proven that they can consistently pick the winners. So my approach is to pick the losers. Then I don’t invest in those companies!
What do you wish you would have known before you started angel investing?
The exit timeframe is critical to success. This is obvious but it needs to be emphasized in all investment decisions. The longer an exit takes, the more time for various bad things to happen (dilution, market changes, time value of money, etc.)
What space are you most interested to invest in next?
I invest in anything that meets my criteria that I think the product or service matters, I understand it, and it will make me money. So far, this has led mostly to investments in life sciences and hardware companies.
What resources should entrepreneurs and angels use to learn more?
There are a number of really good books and websites that can help Angels in all aspects of investing. Examples are Angel Investing by David Rose, Get In Get Out by Troy Kauss et al., and the ACA website. Ignore statements that indicate an Angel needs to have a background that allows them to negotiate a deal, run a company, provide critical contacts, etc. The only prerequisites should be interest, risk tolerance, and intelligence.