September 2, 2015
The annual Midas List may be filled with the biggest name VCs, but I firmly believe that the strongest startups ubiquitously begin with ardent support from capable and helpful angel investors. Sadly, many current angel investors choose not to lift a finger to help their portfolio companies; $25,000 becomes, paradoxically, more expendable than the few minutes it takes to make some introductions. If you are angel investing, don’t be that way; here are five ways to be a helpful angel investor and earn the genuine respect and gratitude of your portfolio company CEOs:
1. Be Available for Strategy Time
It’s amazing how often other angels tell me, “I’m not really an expert – how and why would I help them on strategy?” The truth is, startup founders nearly always need good advice in a myriad areas, and chances are you are an expert in at least one of them. One friend of mine, an investment banker, has provided invaluable advice to a Series B startup as they navigated the waters of a potential acquisition. Another – a retired headhunter – made two introductions (that probably took 5 minutes to write the emails) that have resulted in the company’s five most impactful hires.
2. Make a Few Introductions to Other Investors After You Commit
Every angel investor has a network, even if it’s just your tennis buddies. It means a lot to founders when angels who commit to invest take the bit of time to make introductions to a few colleagues for the round. Not to mention, it’s good business: startups, especially seed stage ones, often spend weeks or months raising very small amounts of money that could be gathered much more quickly if all their investors chipped in a little effort.
3. Make Branding, Thought Leadership, and Partner Introductions
Keep an open mind here. Introductions to conferences are always a great help, even local ones. Are you part of your state’s technology council or regional venture conference? Start there. One good example that’s a bit more out of left field: one of my best portfolio companies is conducting a major study with universities. Eight investors were kind enough to make at least one intro each to an alma mater where they knew someone in the career center or alumni office, probably saving the startup founders weeks of searching and cold-calling for the right person.
4. Belong to Angel Investing Group(s) with Fast Track Capability
Most best-practice angel groups let their members fast-track in companies they have already committed to fund. This can dramatically speed up fundraising, especially if your startup already has a lead investor and/or you can fast-track them into multiple networks.
5. Befriend VCs
There is a pervasive myth that VCs only invest in startups from a handful of angels. This is simply untrue; though some venture capitalists definitely favor referrals from certain successful angels. The reality is that startups have to earn investment from the best VCs, which comes only from getting the company in the right position for fundability and then being compelling when the right opportunity arises. It often falls upon angels to provide that opportunity for a meeting and, if you can maintain a Rolodex of friendly VCs to introduce your best portfolio companies when they are ready (according to said VCs’ own investment standards), you will not only earn your founders’ gratitude but also dramatically increase your returns.
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