Having recently come into some serious funds thanks to a bit of farsighted domain squatting, Betabeat was trolling the net for advice on how best to invest. Stocks aren’t really our thing, so we decided to spread our wings and try a little angel investing. First stop, Quora, for some pointers on how to place our bets wisely.
Local angel Roger Ehrenberg has this one covered:
- Admit to yourself that you don’t know shit about angel investing.
- Don’t attempt to lead the round. See 1 above; you’d be doing a disservice to both yourself and the entrepreneur.
- Be the rump in a syndicate with a strong and experienced lead. They will drive documentation and legal due diligence.
- Ask lots of questions, don’t rely on “social proof” but don’t be a oxygen-sucking, time wasting pain in the ass, else this may become the last syndicate into which you get invited.
- Remind yourself that massive adverse selection is at play. The best angels (read: the most experienced, most value-added, most connected, most highly respected) see the best deals. The others see, well…
- This is why if you are new to angel investing that you should hook your star to angels far more experienced and skilled then you, respectfully ask for small amounts of capacity in their deals and try to only focus on deals where you can add something to the syndicate, e.g., a few domain-specific connections, a few business development contacts, etc.