editione1.0.1Updated September 19, 2022
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If you don’t live somewhere with a robust startup ecosystem, or if you are looking for startups in quite specific technologies, you may have to look more broadly.
Let your network know that you are interested in making angel investments. Mention angel investing on your LinkedIn profile. You will be surprised at how many people reach out to you. You can also join investor-centric networks like AngelList, where many entrepreneurs may be looking for investors who share an interest or expertise in their industry.
Whether you are interacting with the local startup community or creating a profile on a national site like AngelList, it will be helpful to have an elevator pitch about the types of deals you are interested in. You might be interested in a particular industry or technology focus or a stage of company. Communicating your desired focus will help get the right deal flow while minimizing the noise.
Alternatively, many angels prefer to remain as anonymous as possible. That is fine too. There is really no wrong way to go here.
Do you know what the key success factors and milestones are for a medical device startup? How about a messaging app targeted at teens? Do you know how long it takes to sell an enterprise software solution to Fortune 500 company CIOs? You will be a more effective investor if you understand the market and/or technology that is the focus of the startup.
importantIn 2011, Rob Wiltbank of the Angel Resource Institute completed a study of angel investments made by members of angel groups.* He found that angels had a 60% better return on their investment when they invested within their area of expertise. So stick to your knitting!
Why? If you have had a career in enterprise software sales, you will understand intuitively the challenges in selling in that market. You’ll know how potential customers evaluate solutions, allocate budget, calculate ROI, what their risk tolerance is, who the influencers are, how long the sales cycle takes, what supporting proof is required, what marketing techniques are effective, and so on. You will have colleagues and friends in the industry that you can contact to litmus test some of the assumptions being used by the startup you are considering. You will be in a much better position to evaluate an idea, scrutinize the team, gut check the financials and perform effective due diligence if you are looking at companies in an area you know something about.