So you want to be an angel investor?

AWESOME!!

The world needs more angel investors.

(They are called angels for a reason! 😇)

Angel investors are a critical part of every healthy startup ecosystem and help SO many founders in the early days.

They provide:

• Early working capital

• A vote of confidence! Belief in the founder and what they are building

• Helpful customer intros or other industry expertise

• Social proof for other investors or customers

I often talk to successful business people or high net worth individuals who are interested in angel investing but aren’t sure where or how to begin.

Here are some questions I like to ask to help someone get clear on their strategy!

1. Why do you want to angel invest?

No wrong answer except, “I don’t know.”

Your “why” will determine everything else about your angel investing!

Some common answers I hear:

• I want to help founders (especially founders like me).

• I want to diversify my portfolio and test a new investment class.

• I want to get more involved in the startup ecosystem.

• I’ve had a great career and want to pay it forward.

• A lead gen and/or research tool — it’s part of my company’s business strategy (often with agencies or entrepreneur-owned businesses that may partner or acquire you).

• I’m interested in it and want to try it out.

Usually people will say they want to do it for #allthereasons!

That’s great and there’s always many levels of benefit, but I’d get super clear on the *TOP* priority.

Because each “why” leads to a slightly different approach and criteria of success!

2. What do you think makes a great founder?

Again, no wrong answer but it’s important to identify ahead of time what you think matters.

• Do you want someone scrappy? Salesy? Brainy? Rough around the edges? Polished?

• Do you like a certain background? Someone from your hometown? Former athlete? F500 experience? Skipped college?

• Are there types of people you want to specifically invest in (e.g. recent grads, women, doctors turned entrepreneurs, immigrants or first-gen Americans, etc)?

A lot of this will be influenced by your own experience in the world!

You’ll adjust what you look for over time as you gain information and data points but it’s good to have a starting hypothesis.

3. How do you want to add value? What is your expertise?

You may say, I just want to write a check.

You may say, I have 20 years building software so I want to mentor a technical founder and help with engineering strategy.

Both are correct answers.

Both result in different angel investing experiences and strategies!

Do some self-reflection on where you can be helpful and how much help you want to offer.

That will influence where and how you deploy your angel checks!

Speaking of checks…

4. What is your financial framework and timeline?

Before you make it rain, make a plan!

Like with all experiments, it’s better to decide your protocol ahead of time than on the fly in a founder meeting.

It’s hard to think rationally when a charismatic founder is explaining how they’re going change the world and you’re ready to send a wire on the spot for $1M!

(All the founders are like, yes, Kathryn, they should do that 😉)

Here’s some example deployment strategies:

• I’m going to write 10-20 checks of $25,000 over the next 2 years.

• I’m going to write 3 checks of $10,000 and then see how I feel.

• I’m going to write 5 checks of $50,000 as I find companies I love and can help.

Get clear on:

• How much money total

• How many investments

• Ideal/average check size

• Over what timeframe

• When you will evaluate and assess

5. What are you passionate about?

Here’s where it gets fun:

• What do you really, really care about?

• What do you believe in?

• What do you want to put your hard earned money and time and energy behind?

• What do you want the future to look like?

Maybe you’ve already identified it in the previous questions.

If not, think about it now!

This is also a catch-all for things like:

• Do you want to invest in certain industries? Business types? Geographies?

• Anything that is a hard no for you? (e.g. gambling, fossil fuels or maybe you love those things 😜)

• Any other considerations or guardrails that you want to identify upfront?

Usually after someone gets clear on what and how they want to invest, the next question is:

“How do I get started???”

But that’s a whole new topic 😉 (Let me know want a follow up post!)

The most important thing is to go in with a plan…and be open to the plan changing.

Because, just like with startups, you will learn and iterate along the way!

What advice do you have for folks thinking about angel investing? What helped you get started? What things did you learn the hard way? 😉