It’s Not Me... It’s Us: Investing in a Group

Successful investments in the tech sector can take 8-10 years to exit. This means you’ll get a decent amount of bad news before you get any good news. As the bad news flows in, keep the long game in mind– it could take a whole 6-8 years for money to come in.

Early-stage rounds have the highest risk– they also have the lowest valuation and longest holding period. That said, they also have the highest return potential. Be sure this is the right type of investment for you before jumping in.

Given the risk of losing your entire investment or a years-long payback horizon, 10% is a good starting point. Luckily, thanks to AngelList & other equity crowdfunding sites, the market is open to all investors. For direct investments, however, a starting budget between 100k and 1M over three years is a very solid start.

A tip: act as if that angel cash didn’t exist! Move it into a separate account entirely.

How many investments do you want to make per year? How big do you want your checks to be? What sectors do you want to invest in? Which stage of a startup? Does the location of the startup matter to you? Do you plan to do follow-on investments?

Getting this sorted early on helps you rationalize your investment strategy and focuses your deal flow on inbound and outbound rather than planning. It also forces calibration and pacing.

In angel investing, your “brand” is your reputation and the bottom line: it matters. Maintain your rep as a loyal, trustworthy, respectful, and reliable investor.

Groups like AngelList syndicates and the Angel Capital Association allow you to flock with like-minded investors. You could also create your own branded firm! While there are advantages to this group tactic, consider if you feel confident enough to fly solo.

Investors have openly shared mistakes they’ve made– learn from ‘em! For instance: know you may need to pivot your investing strategy at some point, know you won’t get in on every hot deal, and never invest more than you are willing to lose.

If you want to invest with others, make sure you’re all on the same page! Decide what type of firm you want to be– a pre-seed investing firm or a follow-on firm? Be sure to explicitly define your focus. Try to also get a good mix of experts, generalists, tech people, sales, and operations folk. Lastly, try to innovate often.

How are you or your group managing your online presence? Do you have a website or social media accounts? If so, is your messaging consistent? Think about what you want to be known for as an investor and who you want to market yourself to.

Think about the events you attend– do they reflect you and your values? Are you responsive and personable to those in your investing ecosystem? When you find a good deal, do you keep it to yourself or do you bring in other investors?

Founders and other investors will care about the answers to these questions and you should too. Remember to respond as quickly as possible to everyone, even if it’s with a no. Also strive for consistency and excellence so others see you as trustworthy.