Seven Tips to Become an Angel Investor

Share on facebook
Share on twitter
Share on linkedin

Investing in startup companies can be one of the most lucrative opportunities available today.  Just think of all those millionaires who were made by making early stage investments in companies like Google, Facebook, Uber and other now iconic brands. Early stage investment opportunities could potentially be life changing and create multi-generational wealth. It’s also a rewarding way to help entrepreneurs innovate, and to accelerate additional opportunities within diverse communities.

Yet breaking into the world of angel investing isn’t always easy.  You may wonder: How does one really get started as an angel investor?  And how do you know it is right for you?

I recommend that you first educate yourself about this segment of the financial market, and learn how to gain access into the various types of investment circles that can help broaden your financial future. Here are some thoughts on how to do that. 

  1. Educate Yourself:  Read books and articles, watch videos, and attend online or in-person workshops and other events where you can meet entrepreneurs, watch their pitches, and gain a sense of how investors assess a deal. A good place to start is with local innovation hubs which are popping up in local cities throughout the U.S. and across the globe.
  2. Access Innovation Hubs:  These geographic concentrations of various co-working spaces and resources focus on bringing together entrepreneurs, community partners, academic institutions, industry-leading scientists, engineers, talent, and leading investors to form thriving innovative ecosystems. They also provide such investor resources as education, matching and connecting with entrepreneurs, and access to vetted start-up opportunities.
  3. Leverage Your Connections:  Your professional and personal network can be an excellent source for investment opportunities. It can also be a conduit to building a team of experienced professionals who have direct or indirect connections to help evaluate deals, advise entrepreneurs, and aggregate additional capital. Your network may also have experience and knowledge in various industries and markets to assess trends, opportunities and risks, which are essential to evaluating start-up investment opportunities.
  4. Volunteer / Mentor:  Seek out volunteer and mentorship opportunities within the early stage start-up ecosystem. This provides an opportunity to support something you believe in while staying close to the entrepreneurs who are building the brands of the future. Depending on the extent of your involvement, it’s possible to secure a board seat or equity in exchange for professional services with the emerging companies. At the very least, you’ll be one of the first in line with access to invest in these start-ups.
  5. Join an Angel Investor Group:  There are approximately 400 angel groups in the U.S. with many variations, including membership size, investment focus and fee structures. You may find that some groups have extensive waiting lists for new memberships. This is most likely due to its member base having more capital to deploy than quality deals to invest in. Angel groups often provide the best source of vetted deal flow and lower investment minimums. They benefit from having a consistent pipeline of deal flow, aggregated capital and an experienced network of individuals to form the appropriate due diligence teams.
  6. Do Your Due Diligence:  Angel groups typically implement a screening and review process to filter deals that are deemed worthy and generate enough interest to proceed to the due diligence phase. A very time consuming process, this due diligence requires a diverse skill set that includes financial analysis, marketing, and respective industry knowledge. Collectively, investor groups that contribute more time, oversight and analysis improve their odds of yielding higher returns.
  7. Understand The Risks:  There are always risks involved in any type of investing. Before getting started with angel investing, you need to determine how much money you’re willing to risk. Then understand that without risk, there is no reward. Angel investing can generate superior returns – often better than public markets – especially when a portfolio approach of angel investments and good practices are applied.

There’s much to learn about angel investing but it boils down to two critical components: Education and Access. Reach out to us to learn more about UCN’s educational resources and our access to premium portfolio companies so that you can start investing in unique opportunities today.