How to Become an Angel Investor:
Angel Investing 101 for How to Begin Angel Investing
At its most basic concept, the angel investor definition describes a person with a great deal of money who provides the funds necessary for a business startup or other venture to successfully get off the ground. They don't do this out of the kindness of their heart - their angel investment is usually made in exchange for ownership, convertible debt or some other type of equity in a startup. In reality, just being affluent isn't enough. If you want to learn how to angel invest, there are a few key ideas that you'll want to explore.
As a rule of thumb, you should also be able to allocate up to 10% of your net assets as angel investments without being concerned that you will lose everything.
We've also got a newly released course that can teach you how to begin in venture capital and angel investing.
Angel Investing 101
If you're already comfortable with the answer to the question "what is angel investing?" and you've decided this is the path you want to explore, the next step in your journey involves finding an "in." According to Paul Graham (Y-Combinator), the easiest way to do this is to look around your social and professional circles and find someone that you know that is already an angel investor themselves. Angel investors are constantly conducting business deals and looking for new avenues to expand their network - tagging along for the ride is a great way to get your feet wet, so to speak.
According to an Angel Kings survey, there are more than 300,000 designated "angel investors" in the United States last year alone. Thus, chances are high you know at least one angel investor in your community.
Do Your Research Before Angel Investing
A large component of angel investing isn't just spending money, but spending money wisely. The number one rule for becoming an angel investor is to make sure that you've done as much research as possible into the company or startup in question. Far too many people get hung up on the terms of a deal, the timeline and other things that ultimately don't matter. Ask yourself the following question "do I believe in this company and what they're poised to do?" If the answer is anything other than "yes," you need to keep looking.
As of 2015, the most attractive sector to angel investors is healthcare - it's a great place to begin looking when you're just starting out.
In our book on angel investing - "Kings Over Aces" - we teach you how to make smarter angel investments while factoring in things such as people, product, execution, timing and the financials of the startup. Each of these components are critical to making calculated risks in top startups - and eventually receiving a strong Return on Investment (ROI).
Look at Your Family and Other Relationships
Because such a large part of angel investing involves spending your money in ways that you believe in, it makes sense to begin by looking at your current relationships. Try to keep things from getting too emotional, but look at family members with business ideas or perhaps co-workers from previous business relationships as a great opportunity to begin your career.
Keep Your Eye on the Future = Angel Investing Basics
According to QZ.com, one of the major rules of angel investing 101 is that you should never judge an idea based solely on how it is being executed at the beginning stages of the process. If every angel investor stopped short of a deal just because a great idea was being executed poorly, there would be no angel investors left. Always fall back on the idea itself: is it good? Does it have the type of longevity that you're used to? Once the "growing pains" are dealt with, what does this idea look like in five years? Ten years? Always keep your eye on the future so that you know where you should be focusing your attention on now.
Know When You're Needed and, More Importantly, When You're Not
Based on our first angel investments, we can tell you that most angel funds rest between the ranges of $1 and $2 million dollars. However, they're responsible for a lot more than just money.
Entrepreneurs are strong-willed, forward thinking individuals. Generally speaking, they may not be looking for quite as much input on your behalf as you're willing to give. However, some may be looking for a true collaborator in every sense of the word and might want help with important business decisions like hiring employees. Understanding what type of relationship you're about to enter into will go a long way towards helping you achieve your goal of becoming a successful angel investor.
As a leading, top-ranked angel investing, venture capital and private equity firm, Angel Kings invests in top startups within industries such as biotech and cybersecurity. Learn how to become an angel investor and meet hot startups in interesting areas of America.
Get 10 Inside Tips on How to Become an Angel Investor From the Expert Angels: