Advice for Startup Investors

At the iConnections Investment Institute Fall Forum on October 26, we heard from Angela Lee, Professor of Practice/Chief Innovation Officer, Columbia Business School. Angela gave our members some practical advice for first-time startup investors — find out what we learned. 

Pick a sector you know and like

Where do you want to focus? Think about the sectors that you have expertise in, a network, and that you are actually interested in. You will be spending a lot of time and energy with your startup, so make sure you will stay interested. 

When and where do you want to be?

What stage of startup feels good to you? If you want to work with just a few founders, or whether you want to go larger — what feels good is a personal choice. Similarly, where are you happy working? You need to feel comfortable spending time in the same location as your startup, and incorporating travel into that equation. 

Will you appeal to a limited demographic? 

Some funds only spend on certain types of founder, such as females, or the formerly incarcerated. Think about what you want to achieve and who you want to work with.

Understand the financial risk 

Venture for startups is a very speculative class. You are going to write off between a third and half of your money. You will hit some singles and doubles, one company could then go 50x. Right now, from seed to exit is usually 8 years — and that is increasing in duration. 

How much control do you want to have? 

If you want a ton of control, be a sole angel. Find the founders, carry out the diligence, on your own. Or join an angel network, where you have autonomy over curated offers. You could have angel funds, where several angels pool their capital and reach an agreement over what is invested in.There’s no right or wrong, it’s up to you to decide. 

Do your homework and engage with the community

There will be a pitch forum near you at least once a week. Take a look, hear them out and note down any that you would consider investing in. Look them up later on and see how they did — and compare that to your gut feeling. It’s a good way to build that confidence. You should find other people you want to do this with. It’s more fun to go together, to join a network, an accelerator, finding other experts to learn from and shadow.

Building a deep network is important to keep you competitive. Build an ecosystem with the people you partner with. And think about the funders who came before you, and those who will follow after you. Look for those co-investors, so you can build a network that supports a start-up all the way through its growth. Find accelerators, schools for startups, helping startups find mentors and introductions to other investors. Be there to add value, find deals, and support the company. 

Disclaimer: This content was transcribed by the iConnections team.

Interested in learning more about startup investing? Learn more about the 37 Angels bootcamp at http://www.37angels.com/bootcamp

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