I got into angel investing for one simple reason: To support some of my good friends who were building brands that I really believed in.
At first, I would help them raise money by introducing them to other investors who I trusted. However, I soon realized there was an opportunity for me to invest alongside them as well.
What is angel investing?
More traditionally, angel investing is defined as a form of financing where someone, typically with a higher net worth, provides financial backing to small startup companies or entrepreneurs in exchange for equity. It’s often a one-time investment and the angel is usually someone that has a personal or professional relationship with the founder/entrepreneur.
My personal definition of angel investing is slightly different. A big misconception is that angel investing is only for the super wealthy.
The truth is, you don’t have to be crazy rich or a professional investor to start investing your own money. A typical angel investment is about $10K from an individual angel; since angels often invest together, an angel round can collectively be as high as $300K or more.
But the one thing you must have is a strong belief in the person, brand, and product you’re investing in and an understanding you may not see any of that money ever again (or at least for a very, very long time).
My first experience as an angel
One of my first angel investments was just over 5 years ago with a good friend and former roommate of mine, Ali Asaria, who started a company called Tulip Retail. There wasn’t any real science to it. I didn’t really have a thesis and I wasn’t looking to deploy a specific amount of capital.
It all came down to the fact that I really believed in Ali and his company and knew that I could support him. Right from the beginning, I bought into Tulip Retail’s mission and what they were trying to accomplish, which is to empower the next generation of retail workers with world-class mobile-first, cloud-first enterprise software that transforms the in-store experience.
The fact that Ali was also getting backed by other trusted investors gave me the confidence to invest as well, since I didn’t necessarily have the time or resources to do all the due diligence necessary.
Since that first experience, I’ve had the opportunity to work with many more good friends over the years, like Mike Katchen from Wealthsimple, Anshul Ruparell, and Blair Livingston at StreetContxt. I wanted to support all these amazing companies because I felt the same excitement about what they were doing and who they were as people and entrepreneurs.
How to find an angel investor that’s right for you
While there are some angel investors out there that do it more professionally and are purely doing it for the financial returns, I think most angels are actually looking for an opportunity to build a relationship and make an impact. The best angel investors take the time to get to know you and believe in you outside of just the big idea.
At the end of the day, your idea is going to change and evolve so many times. So it’s important to start building those relationships early and offering people you trust and who can truly get excited about what you’re doing the opportunity to invest in your company.
The people that make the best angel investors are professional acquaintances, but there are also resources like AngelList you can check out. And of course the best angels aren’t just people who can provide capital but also those who can offer advice and perspective.
Just remember to always protect yourself and your brand. A lot of people might want to give you money, but not everyone should. Here are some questions to ask to make sure you end up with the angel investor(s) that will help guide you to success:
- Have they done other deals?
- How long have they been investing for?
- What is their background education and experience?
- Do they have any knowledge about your particular industry?
- Do their philosophies on management align to yours?
- Do they have any control terms, and if so, what are they?
The list goes on, but the point here is: Do your due diligence and don’t let your grandmother invest in your business (unless she has a proven track record of building and selling companies.)
So you have an angel, what’s next?
Once you have angels backing your business you have to manage how you communicate with them. We like to keep in touch regularly and know how our investment is doing, so consider a monthly newsletter with a P&L report and annual report that dives into financial reports and budgets.
Angels will also have to be represented on your board so they can have a voice in major business decisions.
Lastly, any good angel will have an open door policy so you can usually get in touch with them informally anytime.
When an angel gets his wings… he flies high
So far I’ve personally invested in about 15 companies. Each and every one of them was born through relationships I’d built throughout the years. Luckily, most of my investments are up, some even by 10X. And only one of my investments has exited; however, it’s really hard to predict liquidity as an investor.
But I got to the point where I wanted to figure out a way to help even more founders and entrepreneurs, especially after learning how difficult it is for a lot of these early stage companies to get funding.
One of the major reasons we started Clearbanc was to help entrepreneurs by giving them easy access to affordable funding and an alternative to traditional forms of funding like debt and equity financing. I may not know them all personally or want to be a shareholder. I may not even be able to help them from an operational perspective. But what Clearbanc allows us to do is help founders at scale, which is pretty amazing.
I was doing it on a one-on-one basis with friends as an angel investor before, but now I have the capacity to help thousands and tens of thousands of entrepreneurs around the globe. To date, we have helped over 2,000 founders grow with non dilutive capital – and I couldn’t be more proud.
I’m so excited to be where we are today, and I can’t wait to see where Clearbanc will go in the future and how many founders we will be able to help succeed.