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I'm a wannabe Angel.

I don't sit on a huge pile of cash, but my intention is to help startups in whatever possible way within my capacity. I haven't made a decision yet, as this thought has recently crossed my mind after going through various forums and having read the woes of startups.

I'm myself NOT having an entrepreneurial mindset. I'm working with one of the software companies in India having more than 12 years of experience in the IT industry assuming various roles from being a programmer to a Manager.

Since past few days (yes, not even weeks yet) I have been trying to gather as much info as possible, solely from the internet, and would continue to do so for some more time. I need guidance from established Angels visiting this forum.

Does an Angel need to be Techno-savvy? What are the challenges/pitfalls faced by Angels? Do Angels hedge their risks in some way or the other? Does anyone know of the 'minimum requirement' in terms of money I should be willing to put, in order to get associated with a well known syndicate of angels?

Please feel free to go beyond the above questions while you help me.

I'll add more questions here as they start bugging me.

Your two cents would be worth a million for me. Thanks in advance!

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3 Answers

up vote 4 down vote accepted

Angels provide a vital bridge between your family and friends money and VC money. A typical angel is usually an entrepreneur who made it and now wants to help others succeed (and make some money).

It helps to know the market you invest in. That does not mean you have to be tech-savy but you should know when people are lying to you. Usually, angels have a network of experts that they can tap to bridge their knowledge gap. So, build a network of those types of people.

The challenges that angels usually face is quality deal flow and how to exit. Everyone wants money. Your job as an angel is to sort out which ideas have a shot at making it. You also have to deal with the reality of the exit event, which is how you get your money back. Another downside is that the companies you invest in will ask you for more money. If you have it great. If not, you need to help them find it.

Angels hedge their bets like any other investor by placing multiple bets. That's the best way to spread the risk and ensure some return.

One other thing to keep in mind. Once you invest in a startup, assume the money is gone. Don't rely on ever getting it back. You will sleep much better at night and you will be surprised when it does make a return. Way too often, angels expect a return on their risky investments and it never happens. The lesson, only invest what you can afford to lose.

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Thanks Jarie! That's quite informative and it has covered all the questions I posed. :) – Sandeep Satavlekar Feb 13 '10 at 12:02
Sandeep- Glad to help. Good luck investing. – Jarie Bolander Feb 13 '10 at 22:35
up vote 1 down vote

Here are few points to consider

  • You should have enough capital so that you can have a diversified portfolio. Lets say you invest in 10 startups over the period of time. Then 3-4 of these 10 startups will be complete failure, 3-4 will do so so and 2 of them will be hit that will make you money.

  • What else do you bring to the table in addition to the money? It adds more value if an angel investor can help a startup through his contacts, expertise and experience of building companies.

  • Are you willing to wait for longer period of time to get the returns on your investments?

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Rahul, Agreeing with Jarie, if I invest in some business, I'd consider that the money is gone forever. If I get some returns I'd consider it as a bonus for me :) When you say, I should have enough cash, that's intriguing me now. How much is enough? I'm adding this question to my main post. Thanks for providing this point :) – Sandeep Satavlekar Feb 15 '10 at 12:09
At the end of the day, angel investors need to make money on their investments and hedging the bets is critical to achieve that. This is where enough capital comes into picture. There is no one best answer for how much capital is enough. In US, normally the angel investment starts with 25k+. So if you wants to invest in 10 companies (for hedging the bets) over the period of time, you will need at least 250k. In US, one also need to be Accredited Investors to get into angel investing. – Rahul Feb 15 '10 at 17:28
I am not familiar with the angel investment scene in India. I would suggest the following 1. In India, what's a typical range for angel investment in the type of companies that you are looking to invest in? 2. How many investments are you planning to do? Its critical to hedge your bets. 3. Talk with other successful angel investors there to get more information. 4. Are there any angel groups or angel networks that you can join? – Rahul Feb 15 '10 at 17:28
@Rahul, I really appreciate your comments. I have begun to feel that there should be up-oting feature for the comments, too. – Sandeep Satavlekar Feb 17 '10 at 18:01
up vote 1 down vote

Money, money, money

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Oh! ThomPete, How's that gonna make me different from a bank/VC/money lender? – Sandeep Satavlekar Feb 15 '10 at 12:14

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