Angel Group Syndication Process Design (Part 2): Paul G. Silva

Angel Group Syndication Process Design (Part 2): Paul G. Silva

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Every Startup Needs an Angel

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Angel InvestorYou’ve been watching the markets like everyone else on Earth, and you know too well the direction they’ve been going. And that makes your search for a place to invest your hard-earned cash a bit disheartening, especially if you’re one of those investors who hopes to make money with his investments. Here’s a thought: become someone’s angel – an angel investor, that is, who invests in a start-up venture with a high potential for earnings.

Angel Who? Invest Where?

It works something like this: you attend an industry event (or maybe a cocktail party) where you encounter a brilliant and enthusiastic entrepreneur in the process of launching a new venture. It’s clear to you that the business is on track to succeed if the owner can scrape together enough capital to get the thing off the ground. The two of you might be made for each other. She’s looking for investors, and you’re looking for an investment opportunity.

Before you slam the door on this one, give it a bit more thought. It’s true, you want in, but you’re scared – you’re fairly certain you’ve never done this sort of thing before. It’s pretty simple, really. As an angel investor, that is, an individual with capital (money in hand), you agree to lend financial backing to a promising start-up business, preferably one in a high-growth industry with tremendous upward momentum. The angel (in this case, you) invests personal funds and gets a stake in the new company in return (usually bonds that must be repaid at a specified date in the future or ownership in the form of stock shares).

Angel Research

Naturally, you’ll do your homework before making the decision to become an angel investor. You want to be as certain as humanly possible that you’re putting your money in an enterprise that will make more money for you, so don’t strap on those angel wings until you have thoroughly reviewed the company’s potential for growth. Learn all you can about the skill and experience of the management team. Ask about everything, and don’t be shy about it; and when you have picked over every detail of the start-up’s files, learn more from outside sources.

As an angel investor, you have some flexibility to name additional terms for investing in start-up enterprises. At the very least, demand regular communication and updates on the status of business, and make sure you define “regular.” Maybe you want a seat on the board. You may be an angel, but that doesn’t mean you can’t negotiate terms.

If this is sounding good, but you’re pretty certain your modest nest egg won’t be attractive to a start-up business, consider forming an angel investor pool. That’s right, invite your friends and acquaintances to join you.

* Comment policy - don't be a jerk (or spammer).

  • Lorisa

    According to what you mentioned in the article, I agree with your view of “Angel Research”. You emphasize the importance of researching an enterprise before putting the money in it. And I want to know which aspects are needed to be researched.

  • uplana

    There is a desperate need of present management & asset allocation for a fruitful future especially in the current financial crisis. The concept of “how to manage money” is gaining popularity nowaday's.So its equally important to invest your money in the right direction along with making money. I am agree with the fact that a proper homework is required before putting your money in any enterprise

  • http://www.venturehype.com The Hyper Team @ Venture Hype

    When you evaluate an investment opportunity by doing research on the startup, you’re essentially conducting due diligence. Due Diligence, as defined in Carl’s Angel Investor’s Challenge #2: Due Diligence, “is the research required to make certain that a business opportunity is really as promising as it seems. It focuses on identifying risks rather than rewards.”

    Both Carl and Dr. Morrison suggest potential investors to take a hard look at the startup company and learn all you can about the opportunity to find out whether the company is able to live up to its potential. You may:

    - conduct credit checks on the founders to see whether they’re credible or covering up problems from the past
    - analyze the business plan
    - study its existing contracts, revenue projections, or even talk to suppliers and customers who’ve done business with the startup (if the business is in operation)

    The more you can learn about what you’re getting into, the less risk you endure.

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  • Cogbuddy

    The article is useful and the explanation given in the reply is good. I could very well associate myself to the angel investment like company. In one of my previous post, i have mentioned about my ignorance in investment. If i had read this post earlier, i would not have done my mistake. I could have got the right path. A well define planned homework is important to safeguard your hard earned money.

  • http://www.venturehype.com The Hyper Team @ Venture Hype

    “The only man who never makes mistakes is the man who never does anything.” Successful people make mistakes, lots of them, because they keep moving forward to achieve their dreams. They may stumble throughout the journey but they always stand back up with more confidence, knowing exactly how to avoid or deal with obstacles. The more they fall, the more experience they gain.

    Certainly, you're now a better investor than before, because you're now more cautious and know what to look for in a startup.

  • Descorpio

    I am a strong believer that one must invest his money rather than saving it. Because savings will give you no returns. Investment demand certain amount of risk being taken. But do not be afraid. Take calculative risk and with the help of people like Angel Investments, everything is made easy. You do not have to worry. But make sure you are gaining more knowledge everyday in partnering with them.

  • tongyun

    The problem that occurs is when an individual doesn't learn from their mistakes. It took Thomas Edison hundreds of attempts before he found the right material to make a filament for the light bulb. When asked if he was discouraged, he said, no, he just found materials that didn't work correctly and kept moving forward. It is this type of attitude that successful people have and mere mortals don't.

  • cirereyes

    I agree, I heard this reminders before from a friend, in school and from successful entrepreneurs but I sometimes forget to do this things when I see a good opportunity and just grab it without doing any research about it and in the end I am the big loser. Maybe next time I’ll make sure to consider all of these things.

  • http://www.venturehype.com The Hyper Team @ Venture Hype

    Great, timeless example.

  • Kejatz

    This is actually pretty simple in my book of making business. Do not be hasty when making such decisions. Always be agile and find out everything that there is to know about people who be working on that project. Seeing their previous work is always the best measure of their working qualities.

  • http://venturehype.com The Hyper Team @ Venture Hype

    Taking calculated risk is something we particularly like at Venture Hype.

  • http://venturehype.com The Hyper Team @ Venture Hype

    Human beings tend to forget common sense. That's why it's important to keep reading and refreshing our mind on skills that are important to us. Doing so will make sure they enter our subconscious mind, turning them into our habits.

  • http://venturehype.com The Hyper Team @ Venture Hype

    This stat from Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence from Serial Entrepreneurs is rather interesting:

    “The predicted success rate of entrepreneurs with a track record of success is 30.6%, compared to only 22.1% for serial entrepreneurs who failed in their prior venture, and 20.9% for first-time entrepreneurs.”

  • http://venturehype.com The Hyper Team @ Venture Hype

    This stat from Skill vs. Luck in Entrepreneurship and Venture Capital: Evidence from Serial Entrepreneurs is rather interesting:

    “The predicted success rate of entrepreneurs with a track record of success is 30.6%, compared to only 22.1% for serial entrepreneurs who failed in their prior venture, and 20.9% for first-time entrepreneurs.”

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