Angel investing is one of those activities that can be done alone or with partners. Your risk tolerance and ability to work within the whims of other people can help determine how much you will want to stomach on your own or share with a group. You will be susceptible to other people’s gut responses and even eccentricities, but they will also be exposed to yours. The success of your investments will greatly depend upon how well you know yourself and what situations are the most comfortable.
According to Vernon W. Yates, Chairman of Governors, Tech Coast Angels, angel investing is a team sport. In working together, angel groups provide a variety of benefits for both the entrepreneur and the angel investor as these groups bring a diverse set of talents and skills to the table that can be leveraged to maximize the return on investment. And, by participating in an organized group, angels can more professionally identify and fund the most attractive companies. [1]
In reality, the number of angel investment groups is growing substantially throughout the world. Those investors who are seeking to combine their skills and talents with those of others are finding that the networking benefits alone are enough to consider joining one of these groups. But there are other factors that enter into the decision to join a network or not. For one, you must decide just how much investing in startups you want to do and where you want to do it.
Many angel investors prefer to keep their investments local. For some, operating within the network is enough to make more deals “local”, but for others, geography matters, too. The ability to “re-live the startup adventure” is a perk for a number of angel investors who are also entrepreneurs. They want the same level of excitement that they found in their own startup experiences.
In addition, many angels invest by way of referral as a result of the circles they already travel in. Angels also often tend to want to support “local” entrepreneurs as they have been there themselves and want to “pay it forward”.
Jeanne Lee at Fortune Small Business recommends that first time angels should not enter into investments alone as they can get too emotional about deals. She recommends either informal or formal networks to help create more structure to investment deals and to allow the angels to invest smaller amounts in more deals to reduce the overall risk. [2]
Whether you decide to go it alone or work with a group, it is important to understand yourself and what you hope to gain from your investment experiences. If you want 100% involvement, going into an investment alone can often grant you as much access and control as the entrepreneur. But, keep in mind that won’t always be viewed favorably by the entrepreneur.
If you are seeking promising investments that require little time and just a portion of what you are willing to invest, consider finding a group that fits your needs. Understanding yourself and your limits will put you in a better position to enjoy the angel investing experience – no matter how much money you make.
Notes:
[1] Angel Investing Is a Team Sport
[2] Angel Investing 101
* For series, references are published in the last installment of the series.