There is so much to know how to be an angel investor! Knowing so, it is also about who you know - because we simply don’t know what we don’t know.
We gather as an angel investment group here in South East Asia because there are so many of us that can contribute to startups in many different ways. These are the things that are unique to every one of us, like what we know or how we can add tremendous value to Startups apart from just money. Our lead angel investors have introduced the right mentors from the right industries, matched startups with acquirers, and even brought huge business to Startups.
There are other things that all of us should know in common to be an angel investor, like;
Startup Jargon - MVP, LTV, CAC, PMF, burn rate, runway, etc, etc. They’re all important to have smooth conversations with startups & other investors.
5–10% of your net worth should be your limit for startup investment. This is a high risk, high return game, people! Keep the rest for your other investments. Securing the majority of your wealth is key here. Only some of it should be allocated for high returns.
Invest in at least 20 startups if you want to see your money back. Many of them tend to go bust, especially if it’s your first few startup meetings.
Invest via an Angel Investment Network - this will help you do #2 & #3 above. To be an angel investor, risk management is one of your top priorities to avoid any disappointments (not with others, but with yourself!).
Practice rigorous picking - it could be the case that you pass on your first 20 startups before you make an investment. To be an angel investor (a goodangel investor), passing on deals is a common thing to do as you may not be able to add value to every startup you see. Many deals are also not really investment worthy as well.
Build a good network of experts - there is always a time where an angel investor needs industry expert opinions on certain startups. Angel investors should bring in the right people to evaluate startups, for example, on their product-market fit or if they even have a large enough market size, to begin with!
Be prepared to lose a lot of money. If you've invested 5m of your wealth into Startups, how does losing 4m of that sound? That's what you should prepare for. Angel investment money should be money you do not mind losing.
Be prepared to help and guide Startups. Many startups do not just need your money, but also your time and energy. So why do Investors do it? Angel investors have enough money - but some want to keep active post-retirement, or they just love the challenges of a growing startup. Some just want to contribute to young Entrepreneurs as they enjoy doing so.
Do keep track of your Startups regularly. CEOs of Startups generally want to do little reporting as they can be quite busy growing their business. They go through crazy periods as there is always some unexpected issues as they grow. So, it is for Investors to get their fair share of information so they can help Startups when needed. At Nexea, we handle this for you!
Know your focus on Startup angel investment. There are many levels of startup Investment by fund size, or even by industry. Knowing where your portfolio size and circle of competence is will help you de-risk your investments.