How to be an Angel Investor...and make money

Angel Investors are a special breed. They take on the riskiest investments at the earliest stage where VCs will not engage. That’s why they call them angels. For a struggling entrepreneur they are heaven sent. Jon Pierce organized an Angel Boot Camp in Boston attended by over 300 Angel Investors and aspiring Angels. Wade Roush of Xconomy.com has an excellent summary of the conference.

Angel Investors are usually experienced entrepreneurs that have built and sold several companies. They love to help start companies, solve the tough problems, build a great team, and be actively involved in finding customers, partners, and key employees. They tend to invest in companies that are within a one hour drive so that they can be actively involved and leverage their network of friends and business associates. They commit significant personal time to building these companies, usually with no compensation. If they can't commit their time and be actively involved in the major decisions of the company, they will probably not invest. 

I have been Angel investing for 18 years. I have learned a few things along the way that might be helpful to you as an Angel investor, or as an entrepreneur looking for Angel investors.

Angels should invest in:

• People you know and trust -Get to know the founders well before marrying (investing in) them
• Businesses that you understand and have experience in
• Alongside investors you trust
• Where you can help and add value

Here is the trick; Don't invest if just one of the above is true, or even two of them. Only invest when all four conditions are true.

Reflecting on my past Angel investment success and failures I found four other attributes of success;

• Founders were awesome, one technical and one business/visionary
• Growing market ready for disruption (timing)
• Excellent technology that made something smaller, faster, cheaper
• Experienced investors involved

Your odds of success increase greatly if all 8 conditions above are true. The first four help you sleep at night. The last four are critical to your financial success. The more of these that you can check off as true...the better your chances of financiall success.

One last point. Many Angels use Convertible Notes to make their seed stage investments. Generally, I think this is a bad idea, for reasons I explained in this post "What You Should Know About Convertible Notes" 

Get involved. Help a startup. Here are some Boston resources and connections to help you get started.

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