"What are angel investors looking for?" I get that question from time to time. Here's my best set of answers...
Quick, accurate answer: Depends. This blog describes what I look for.
Broader more general answer: We look for investors and investments where we can help move the needle, make a difference, apply our resources, have some fun and make some money.
That's good news and bad news for entrepreneurs.
Angel investors, unlike venture capitalists, are investing their own money. That gives them the freedom to invest across a broad spectrum of early stage ideas...whatever lights their jets. We mentor, connect and network, looking for the people and ideas that we will eventually support with an investment.
Over time, we tend to gravitate toward an industry, vertical or theme. That evolution builds on our previous experiences to improve the probability of better outcomes for the high risk investments we make.
I am drawn to ideas that improve the efficiency of existing processes. For instance, Alltuition improves the process of finding and managing college tuition. SA Ignite streamlines the process of submitting meaningful use data to the government. ASAP Advisor Services is one stop shopping for investment firms that need to submit performance data to as many as 40 different databases. I love these concepts. It's exiting to support these entrepreneurs.
That said, I thought it might be helpful to share my personal investment philosophy. Built up over 20 years of successes and failures, this is how one angel investor thinks. It likely, contains perspectives that other angels subscribe to. I hope entrepreneurs find it helpful in understanding what goes on in the minds of angels and I hope it provides some guidance to budding angels.
Enjoy...
Angel Investing Philosophy and Guidelines
Focus on amazing, coachable, energetic, promising, trustworthy, capable people, who are interested in monetizing their efforts, solving a big problem, creating something epic, executing like fiends and attracting and retaining smart, passionate people.
Have a theory about what you're investing in. Know the market, competitors, technology, history, pain, fear, dreams and proclivities of your customers as best you can before you invest.
Do the simple math before you invest. Is it really possible to get the return you are looking for with the market size, price you can charge, cost to deploy, barriers to entry and company valuation?
Pay what's comfortable. Several, if not most, of your investments will fail. The successes will likely require more capital and time than you planned to invest. Trust your gut and your math, not your ego, to tell you when walk away and when to commit more resources.
Stay in touch but don't waste time: the entrepreneurs' or yours. Be available enough to know what your founders need, ideally, before they know what they need, then suggest it tactfully.
“Don't have nothing you don't have time to keep an eye on.” According to the ACA, 60 hours of due diligence before an investment coupled with high engagement afterward ridiculously improves the odds of success.
Ask for help and perspective from your own network. It's the secret sauce you bring to your entrepreneurs.
Listen, especially when you feel compelled to rebut. Remember that what you say may not be what be what they hear. Reinforce your messages from a variety of perspectives.
Insist on hearing bad news immediately. Not because you have all the answers, but because you want the opportunity to apply your contacts and experience to the solution. When you get bad news, and you will, manage your emotions and responses to get the outcome you want. Unleashing frustrations on entrepreneurs only compounds problems.
Trust that your returns will be the byproduct of a well conducted adventure.
Tony Wilkins..as of 2012
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