Have you ever thought about being an angel investor?
While they may be Austin-centric investors, a panel of seasoned angels gave some tips and tricks at SXSWi for people interested in becoming angels (advice also valuable to hungry startups seeking funding). Rick Timmins, a board member of the Central Texas Angel Network, Rosa McCormick, Managing Director of Wild Basin Investments, and Jason Cohen both an angel investor and entrepreneur, shared their expertise.
1. Angel investing is a team sport. There's safety in investing in numbers, and opportunity for support and expertise with more investors.
If you want to get into it, join an angel group, get on an angel list, go to startup events, or become a mentor for a group like 500 start-ups. These are all great ways to find out about up and coming companies and grow your network of potential co-investors.
2. Early seed angel investment is risky. Angel investors do not invest in startups for the money—there are easier ways to make money. People are angel investors because they have time and knowledge to share and they are passionate about entrepreneurialism and its effect on the market.
3. People are everything. Make sure you take the time to get to know the team. The market, product, and technology will change as the company evolves, so as an investor it is important that the team (particularly the CEO) knows how to listen, take advice, is driven and has good leadership skills. If you have any doubts about the team - don't invest.
4. Invest in a company where you have something to contribute, like expertise, experience or valuable contacts. Your time is just as important as your money in guiding the success of the company so choose wisely and be ready to contribute more than your capital.
5. Take your time—but not too much time. When you first start out as an investor be wary of taking the first deal you find. Evaluate the market and be thoughtful in your approach to the investment—many first-timers act too fast and make mistakes. However, hot deals go fast and furious for high potential companies but are often only accessible through angel networks and seasoned investors (so join a group).
6. AngelList is a valuable resource. Although none of the investors use the listing as a primary source of deals, all of them agreed that it offers key information about startups and saw potential for it to increase in value as the site it grows.