I tweeted this out over the weekend:
Random facts: My 1st angel investment failed, my 2nd is still around but closer to failure than success. My LP investing has been mostly flat so far.
I've learned a lot through it all...including just how good I am at losing money.
— Kevin Marshall (@falicon) March 17, 2019
The truth is that I'm not much of an Angel investor.
Partially because I don't actually have the money to be a big/active player, partially because I am still actively building and working on my own startup, and probably most of all because I'm just not that passionate about it (as a means to profit I mean).
Instead, here are a few things I've gotten out of the small deals I've done to date:
1. Insight into how other people/teams/companies are "doing it". Including from a fundraising standpoint, a communication standpoint (with investors and others), a sales standpoint (how they craft, communicate, and spread each offer), a team building/growing standpoint (who and how they hire), and of course a technical standpoint (how they go about building whatever they are actually building).
2. More networking opportunities with "high net worth individuals". This is a huge advantage for my own startup/projects (if/when we need to go raise more ourselves) as well as a key way to get into bigger/better deals over time (assuming I'm actually adding value to the relationship and co-investments as well).
3. A deeper understanding of the other side of the table. I have to admit, prior to investing my own money, I was naive enough to really only think about the equation from the "founder" side of the table...I thought "good investment" and "success" were the only things the other side cared about (and I thought what was good for the founder is what would bring these things to the investor)...but the truth is, there is A LOT more going on in the relationship (especially as you evaluate your own why/when/where you spread your own investments).
As this very list suggests, it's not always about the direct/pure investment...every player (probably) has other motives too. Sometimes those motives even/often outweigh the "financial" agenda of one or more players.
4. A better understanding of my own value, strengths, and where to focus. I'm probably never going to be writing large checks — so I have to bring something more than just money to the table to be worth the "line item" on the cap table (and if/when it boils down to me being "just money" to a deal -- that's a deal I need to pass on).
I like to think I can help at least at an advisory level on the tech front. Either with direct code, code review, technical design/specification, or at the very least in helping to vet technical hires/team members.
But to a lesser extent, I also try to help find/recruit team members and be a sounding board for management issues (especially to the CTO).
Depending on the vertical, I might also be able to help a little with networking and/or introductions (though I'm not nearly as connected or influential as I would like to be).
No matter how great the idea sounds, how much I like the team/founders, or how big the market/opportunity seems...if I can't identify what I'm going to be able to actually bring to the table in this deal...I'll end up feeling powerless, frustrated, and out-of-touch.
I'll feel like dead weight -- and ultimately that means it's a deal I should not get involved in.
Note: I only learned this by living through it and reflecting upon it. I'm sure plenty of people do very well being "just money", but it's not in my DNA.
5. The feeling of "helping".
To date, I've actually only invested in companies started by people I've known for awhile. Teams that have had at least one prior exit. And even still, my "hit" rate is pretty low.
But I've felt great about each investment simply because it's been people/teams I've known...and at the time I've invested (too early to really "know" if it's going to work) it's always been more about "let's see" and "just enough to get this off the ground".
I've known going in the odds are long and the road even longer...that I'm stepping up on belief and our relationship more than anything else (and prob. more than I should be — a.k.a. dumb money).
Regardless of how it turns out, it feels pretty great to help someone get started. To be one of the first to believe in them, the vision, and the potential of the future (well...right up until the loss is recognized of course).
6. The feeling, even if not the reality, of "spreading out my bets". One of the things I've always struggled with as a "founder" is just how much of a "backup" plan to really have?
How much of my own savings do I put into my own projects? How much do I keep for retirement? What other sources of income can I build/rely on while I'm still trying to get my thing to support itself and/or grow?
When thinking about spreading out my bets I could try to invest in things like the stock market, real estate, or even just straight 401k-like options...but putting a small amount of money into other startups just feels "smarter" for me (see point #4 above).
It also gives me the sense that, even if *my* startup doesn't hit as big as I think it will...maybe one of these other little bets will (and I'll still be OK).
Again - doesn't really work out that way in real life (yet)...but at least emotionally, and logically, it feels more right than many of my other options (a.k.a. dumb money [again]).
So - clearly I'm not a great angel investor (yet)...and I may never be.
But I do intend to keep at it (as long as I can afford to).
So that means, for now...my checks will probably still be very tiny. And infrequent. And I'll need to keep adding and finding value in the deals I do that go beyond "just money".
And I'm OK with that. Are you?
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Kevin also talks in more depth about many of the these things around twice a month via his drip campaign and has a day job as CTO of Veritonic. You can also check out some of his open source code on GitHub or connect with him on Twitter @falicon or via email at kevin at falicon.com.
If you have comments, thoughts, or want to respond to something you see here I would encourage you to respond via a post on your own blog (and then let me know about the link via one of the routes mentioned above).