Being a Good Investor

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Updated August 29, 2023
Angel Investing

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If everyone is motivated, the deal is priced attractively, and there are few if any red flags, getting through this process can take as little as four to six weeks. Unfortunately, this process can often drag on for several months or more, in which case it becomes a big time and energy drain for the entrepreneur who is trying to build a company.

important It behooves angels to move as quickly as is prudent to get the deal done if they want to maintain the momentum of the company they are investing in. As an angel, be respectful of the lead investor’s time, and be responsive to their inquiries and requests, as they have taken on the extra work and responsibility for no additional gain.

Paul Graham, in his essay “How To Be an Angel Investor,” writes that being a “good” investor is defined by the following traits:

  • Decide quickly whether you want to dig in on a deal.

  • After you have done your diligence, be decisive about whether you are going to invest. Stringing entrepreneurs along while you are waiting for their company to make progress is bad for them and will not lead to your getting deals referred to you.

  • Don’t get too aggressive on deal terms, as there is plenty of room for a win-win if the company is successful.

  • Be helpful where you can, whether or not you invest.

What to Watch Out For

Non-Disclosure Agreements

Sometimes a company will ask you early on to sign a nondisclosure agreement.

A nondisclosure agreement (or confidentiality agreement or NDA) is an agreement in which you agree to keep a company’s confidential information confidential. In the broader business world, companies consider almost all their information confidential unless it is publicly available on their website, for example, or has been made public through press releases or financial filings. The startup world is a more specialized context, in which the investors will need to know a lot about a company before they consider investing, and will likely be pitching to groups of potential investors and sharing key details of the business in the process.

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