How To Start Angel Investing: 5 Lessons From Reviewing 100+ Pitches
Have you ever found yourself pondering, as a seasoned small business owner, “What if I could extend my reach beyond my own business and invest in others’ dreams and innovations?” Imagine the impact and growth potential, not just for others, but for your own entrepreneurial journey. After a decade of being an entrepreneur, it’s a question that led me into angel investing.
In the last 6 months I've reviewed 100+ opportunities and pitch decks, made my first 7 angel investments and learned a lot from this experience. In this article I will share 5 key lessons from this journey. These lessons can help anyone interested in angel investing navigate this complex but rewarding field.
Angel investing can be challenging, and it’s surely risky. No matter how experienced you are, many angel investors find it hard to pick winning investments. Data shows that 9 out of 10 of the investments you make will fail and your money will be lost. The other winning one will hopefully make up in tenfold for the other 9.
In this article, you’ll learn:
The common pitfalls many new angel investors face.
How your unique position as a small business owner sets you apart in identifying winning investments.
Lesson 1: Expect All To Be Lost
Let me start by sharing a personal anecdote: one of my first investments was in a startup that, despite all the promise, folded within a year. This harsh reality check has mentally prepared me for the possibility of losing all my money in these angel investments that I've made. While it might sound pessimistic, it's pragmatic in a world where the majority of startups do not succeed. But, as small business owners, we have developed resilience and are prepared for the rollercoaster ride of ups and downs that come with building a business.
Lesson 2: Embrace The Risk Of Not Being In Control
The transition from an entrepreneur, where you have a certain level of control in how your business is performing, to an investor, where you hardly have any control, equates to taking a higher risk. This shift in your identity requires time and is undoubtedly a learning process in letting go of control. However, I've come to appreciate the journey because it's an integral part of becoming an angel investor. It's about getting more comfortable with uncertainty and acknowledging that angel investing is your next level of personal growth as a business person.
Lesson 3: Be Patient When Choosing
Out of the 100+ pitches I've reviewed, why did I choose to invest in only a handful? The answer lies in the fact that when you start out, it takes time to develop one's selection process. Every pitch is a story that unfolds and you want that story to align with your experience as an entrepreneur and your expertise about a certain sector, industry and technology.
Lesson 4: It's More Than Just Money
Investing transcends the mere transaction of money. It’s about deepening your knowledge of a certain industry, fostering relationships with the founders, understanding larger market trends and being at the forefront of new technologies shaping the next decade. If founders are open to this, angel investing is also about mentoring, sharing wisdom from personal experiences, and providing constructive feedback. Giving back to the next generation is a foundational pillar in your journey as an angel investor and enriches the journey far beyond monetary gains.
Lesson 5: Commit To Diversity
Angel investing is a realm predominantly occupied by white, young men from first-world countries. However, I envision a future where there is a greater representation from all walks of life. This is more than just a dream; it’s a mission that I am deeply committed to and being an angel investor allows me to put my money where my mouth has been for decades. Being different in this space, as an investor and as a founder, brings in fresh perspectives, ideas, and innovation.
Closing Thoughts
The transformation from a small business owner to an angel investor has been an exciting and enriching journey, inspiring me to make a meaningful difference. These five lessons helped me set my first steps into the intricate maze of investing and we navigate this path together, let's redefine success to encompass not only financial wealth but also social impact and inclusivity.
