The hard part of angel investing

In series A, it is essential to have access to a data room with exhaustive information about a company.

For a product to conquer a market, it has to be ten time better than the existing offer. Marginally better will not be enough to change client’s behaviors. Uber is cheaper, more informative, it gives more control to clients, and it has better service usually than taxis.

When is it a good time to exit an investment ? One solution for investors is to give equity to employees on a secondary market. That gives investors the option to sell to them. Some people like to hold a private stock forever à la Warren Buffet.

It is important to study failures as well as wins. I heard a very successful investor say that she lost a lot of money when she invested in an online gaming company with female gamers – a kind of game and dating service. They were making lots of money. After the series A, another major investor decided to put pressure to remove this service and put more controls on it to make it go more mainstream. This killed the “goose laying golden eggs” and the company failed. She saw warning signs early on, and she went ahead anyway.

There is a danger for angels of Fear Of Missing Out (FOMO). The only FOMO to have is to never invest.

Founders are under a lot of pressure to perform, and sometimes they get desperate. There have been rare cases where people took their lives. It is critical for active angels communicate that they are available, lend an ear and give or get help for executives at the most difficult junctures. At the end of the day no business is worth taking one’s life.

A lot of founders truly succeed only after third or fourth company, and failures are normal in entrepreneurs, and part of the growth cycle.