Raising capital is the main goal of any entrepreneur/angel investor. Angel investor is an individual, or a group who particularly invests in the start-up companies in exchange of the equity ownership interests. High profile successful entrepreneurs/companies just name a few such as Facebook, Google, Uber, Costco, Groupon… are originally founded by angel investors.
Because you invest your own money into the startup companies, both sides will take the risks while engaging business activities and most importantly, expecting the significant investment returns. High risks and opportunities are hand in hand. According to the Authors, “Sourcing or identifying entrepreneurial projects of merit is the first step of making early-stage investments”. You need knowledge, doing a lot of research, searching for mentors or advisers to help understand any business problems and solutions to continue the ventures. Determine what is important to you to create an effective sourcing strategy and learn from this valuable tool.
Besides of your valuable time, your finance depends on your sourcing strategy because “the risk is real and you can lose all your money” (Book: Winning Angels – The Seven Fundamentals of Early-stage Investing of David Amis and Howard Stevenson). Invest your time to invest your capital is a crucial and “it is very easy to lose lots of time in sourcing and evaluating early stage deals.” (page 35).
Knowing yourself regarding your net worth, time availability, background, and relevant experience. It is an advantage of relying on your social network such as Facebook, LinkedIn, Twitter, and others emerging platforms such as Angel list for sourcing. Family, friends or colleges or service providers to find the most promising investment opportunities.
Investing your own money is a little scary and very personal, so it is important to ask yourself questions relating to the companies that you are considering to invest: Do you get to know them well and is there trust relationship? Do they inspire you and what you can do to help them grow? Can you create value team who have quality, commitment, passion, and integrity in the company?…
The Authors provided eighteen activities which is divided into four main groups (Preparation; Networking; Visibility and Focus) in Chapter 7 of the book. These essential activities are to help resolve your sourcing strategy while developing opportunities, generating deals in quantity and or quality and getting access to the potential deals. Get quality deal source from entrepreneur referrals which have high value and the value depends on alignment with the angel investors. Understand your investing focus to the pure startups or to the established companies. Create and identify investment opportunities outside of the neighborhood network. Develop a broad network. Do multiple deals. Invest in industries you understand. Trust your own judgment. Focus and learn from the professionals.
Amis, D. and Stevenson, H. Winning Angels: The 7 Fundamentals of Early Stage Investing. Pearson Education Limited, 2001.