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Angel Investing Opportunities

<keyword id="948730" type="UNKNOWN" weightage="100" keywordseo="angel-investment">Angel investment</keyword> in Indian startups hit a five-year high in the year that ended in March 2016. While venture capital firms may appear to be stumbling, existing angel investors are pumping in serious money into Indian startups. 
 “4-5 years ago, there wasn’t enough money available. As more entrepreneurs are turning angels, the money has increased. Also, more people are willing to risk being an entrepreneur. As more good entrepreneurs are out, more people are willing to invest. It’s a cycle.” Saurabh Srivastava from <keyword id="328347" type="ORGANIZATION" weightage="100" keywordseo="Indian-Angel-Network">Indian Angel Network</keyword> smiles. 
 
According to a recent report by venture debt firm InnoVen Capital, angel investment in India in FY16 stood at a whopping Rs.113.6 Crores over 69 deals. That’s a 62% hike in deal value and 47% in deal volume from last year. 
 
VC (Venture Capital) firms have turned increasingly cautious about their bets since late last year. This has forced several startups to shutdown or rollback. However, angel investors remained upbeat. Angel investments initially slumped from the June quarter of 2015 to Rs.20.19 Crores in the September quarter and Rs.18.9 Crores in the December quarter. However, investment activity soon picked up in the March quarter when Rs.33.36 Crores of fresh capital was pumped into the ecosystem. 
 
Srivastava explains the phenomenon. “The funding slowdown didn’t affect the angel investment cycle because while big PE firms were affected by the Chinese slump, at the angel level, that’s never an issue. The companies we invest in will mature over the next 3-5 years. The slowdown will have moved by then.” 
 India’s four major angel groups are the Indian Angel Network, <keyword id="1197633" type="UNKNOWN" weightage="100" keywordseo="Chennai-Angels">Chennai Angels</keyword>, <keyword id="1786254" type="UNKNOWN" weightage="100" keywordseo="Calcutta-Angels">Calcutta Angels</keyword>, <keyword id="948689" type="ORGANIZATION" weightage="100" keywordseo="Hyderabad-Angels">Hyderabad Angels</keyword> and <keyword id="164924" type="ORGANIZATION" weightage="100" keywordseo="Mumbai-Angels">Mumbai Angels</keyword>. 
Srivastava says the focus on cash conservation and unit economics instead of only growth would ensure angels never fund a startup bubble. 
 
“It’s all about the pace at which we fund. Our typical investment is under a million dollar. If somebody wants a $10-20 million valuation, we simply won’t invest. There’s no pressure to deploy”, he observes. 
 
So startups, that’s the bottom-line. Run fast or slow, that’s fine. Just run. 
 
<a href="http://jamaicabolt.com/wp-content/uploads/2015/08/Usain-bolt-on-your-mark.jpg">Image source</a>

Why India’s angel investment won’t ever see a slowdown

<div class="image-container float_right" style="width:571px"><div class="image"></div>t) Jeff Clavier and Jason Calacanis; (Bottom, left to right) Chris Sacca, Aydin Senkut, and Mark Maples</div>The <a href="http://www.angelresourceinstitute.org/">Angel Resource Institute</a> studied investment trends over the course of 2012 from 541 deals and $804.4 million in total rounds.
It pulled together a report on the state of angel investing.
Here are the findings.

The State Of Angel Investing [Charts]

<ul><li>In an interview with Business Insider, Dr. Apoorv Ranjan Sharma of <keyword id="3189966" type="PERSON" weightage="20" keywordseo="Venture-Catalysts">Venture Catalysts</keyword> spoke about policies the new government can bring about for <keyword id="6362513" type="UNKNOWN" weightage="20" keywordseo="startups">startups</keyword>. </li><li><keyword id="6406536" type="UNKNOWN" weightage="20" keywordseo="Angel-Tax">Angel tax</keyword> has been one of the most hotly debated issues, and Sharma believes tax incentives will encourage <keyword id="1848628" type="PERSON" weightage="20" keywordseo="angel-investments">angel investments</keyword>.</li><li>Sharma believes that in India, private incubators too need to be given incentives</li></ul>One of the biggest debates in the Indian startup ecosystem has been angel tax. From pleas to removal of the tax to outrage over issued notices, startups in India along with angel investors have pleaded to the government for better policies ahead of the upcoming budget on July 5. In February, the Indian government came up with a decision regarding angel tax. The exemption for angel tax for shares issued or proposed was hiked to an aggregate limit of ₹25 crore from ₹10 crore. However, that is not enough. As the new government begins work, investors and entrepreneurs are once again hopeful for better, encouraging policies. In an interview with Business Insider, Dr. Apoorv Ranjan Sharma, co-founder &amp; president, Venture Catalysts spoke about policies that the Indian government needs to bring about. Venture Catalysts, as an integrated incubator based out of Mumbai. It provides investment of $500,000 to $1 million per startup with incubation support for one year. “People are talking about removing angel tax but just doing that is not okay. We need to incentivise angel investors, like is the case in some other countries. This policy needs to go in that direction,” said Sharma. He further explained that with startups, especially in the early stages, being a risky asset, it’s a difficult investment to make. “Tax rebates need to be given to angel investors to encourage them to invest. The government can define who can be an angel investor,” he said. In fact, the Department for Promotion of Industry and Internal Trade (DPIIT) is already working on the definition of accredited investors, who could be given tax incentives for investments. Another factor that boosts startups is incubation. Sharma believes that in India, private incubators too need to be given incentives. He cites the example of the US and China, where successful incubators and accelerators are the private ones. “Infrastructure costs are high to set up an incubator. In India, there are so many government-funded incubators coming up but the outcome is limited then. Private incubators should be encouraged either with land benefits to set up or tax incentives,” he said. He further said that India doesn’t even need a startup ministry, what it needs are fundamental changes. The <keyword id="6360789" type="UNKNOWN" weightage="20" keywordseo="Modi-government">Modi government</keyword> has come back to power with a resounding majority in the Parliament, including the <a href="https://www.businessinsider.in/bjp-may-win-majority-seats-in-the-upper-house-of-indias-parliament/articleshow/69511804.cms">Rajya Sabha</a>. This will give the seemingly “pro-startup government” an opportunity to show that it is serious about promoting entrepreneurship in the country. And the upcoming Budget may be the ideal opportunity. See Also: <a href="https://www.businessinsider.in/angel-tax-startup-definition-changed-exemption-up-to-25-crore/articleshow/68063050.cms">Indian government finally comes to a decision on Angel Tax, changes definition of startups</a> <a href="https://www.businessinsider.in/income-tax-department-freezes-bank-accounts-of-babygogo-travelkhana-over-angel-tax-issue/articleshow/67904786.cms">Two Indian startups say the government broke their faith by raiding their bank accounts</a>

The government can be an 'angel' if it replaces tax with incentives, explains a startup groomer

<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image"></div></div></div>Angel investing in Silicon Valley is huge right now.In 2014, there were 2,960 angels who participated in a funding round (and by comparison, there were 822 in 2010).It's so popular, in fact, that there's a four-hour class in Mountain View, California, that will teach you how to be an angel investor, <a href="http://www.nytimes.com/2015/07/07/technology/for-start-ups-how-many-angels-is-too-many.html">the </a><a href="http://www.nytimes.com/2015/07/07/technology/for-start-ups-how-many-angels-is-too-many.html">New York Times' Mike Isaac reports</a>.In March, Y Combinator president Sam Altman held a four-hour, invite-only crash course at the seed fund's headquarters to teach new angel investors how to "evaluate founders and their ideas and how angels can be helpful to companies they invest in," Isaac reports. "The event also stressed that angel investing was difficult to do well, and that newcomers should expect to lose money." Of course, the idea that you can learn all there is to know about angel investing in startups in a mere four hours is literally unbelievable.In the past several years, big tech companies like Facebook and Twitter have gone public, creating lots of millionaires with money to invest back into small startups. "The total angel scene back when I started in 2006 was 30 or 50 angels, maybe with three to five very active ones," Aydin Senkut, founder and managing director of VC firm Felicis Ventures, told the Times. "Now everybody and their family and their pets who have some money want to get into angel investing."The influx of angel investor interest in startups can be a blessing and a curse for founders: having a bunch of notable angel investors provides much-needed credibility for young startups. But when a lot of angels invest in a company that's in trouble and there's no lead investor, there's less responsibility on any one investor to help out.Some founders also say angel investors today are so eager to put their money into startups that they don't do their due diligence by thoroughly reading over deal terms. This fits into Mark Cuban's theory about what he considers to be a tech bubble forming today about private investments. <a href="http://www.businessinsider.com/why-this-tech-bubble-is-worse-than-the-tech-bubble-of-2000-2015-3">In a blog post earlier this year</a>, Cuban asserted that today's tech bubble is worse than the dot-com bubble 15 years ago because today's investments in private tech startups lack the liquidity of public market investments.Here's Cuban:<a href="http://www.nytimes.com/2015/07/07/technology/for-start-ups-how-many-angels-is-too-many.html">You can read the New York Times' full report about angel investing here</a>. <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/iphone-ios-9-new-features-2015-6">The 12 best new features coming to the iPhone</a></h3> <div> <div> <div class="ooyala-video-player" data-video-autoplay="false" data-video-id="5maTJrdTpgHbMWUI2q_PxsufXl1FPqkr" data-player-variable="ooyalapopvideo" id="ooyalaplayer_popvideo" style="width:1280px;height:720px"></div> </div> </div> </div>

Angel investing is so huge, there's a 4-hour crash course to teach people how to do it

Finance Minister <keyword id="19916618" type="General" weightage="20" keywordseo="Nirmala-Sitharaman" source="keywords">Nirmala Sitharaman</keyword> on Tuesday announced abolishing <keyword id="20279287" type="General" weightage="20" keywordseo="angel-tax" source="keywords">angel tax</keyword> for all classes of investors in <keyword id="19945815" type="General" weightage="20" keywordseo="startups" source="keywords">startups</keyword>. In her Budget speech, she also announced various changes with respect to tax rates for e-commerce players and certain financial instruments in the context of long-term capital gains. "First of all, to bolster the Indian startup eco-system, boost the entrepreneurial spirit and support innovation, I propose to <keyword id="20469312" type="General" weightage="20" keywordseo="abolish" source="keywords">abolish</keyword> the so-called angel tax for all classes of investors," she said. The removal of the angel tax is expected to be a boost for startups as it will help in promoting a more conducive environment for them. Sitharaman also proposed to thoroughly simplify the I-T provisions for reopening and reassessment to reduce uncertainty and disputes. "An assessment hereinafter can be reopened beyond three years from the end of the assessment year only if the escaped income is Rs 50 lakh or more, up to a maximum period of five years from the end of the assessment year. "Even in search cases, a time limit of six years before the year of search, as against the existing time limit of ten years, is proposed. This will reduce tax-uncertainty and disputes," she said. Further, she said long-term gains on financial and non-financial assets will attract a tax rate of 12.5 per cent while the TDS rate will be reduced to 0.1 per cent from 1 per cent for e-commerce operators. SEE ALSO:<a href="https://www.businessinsider.in/budget/news/budget-2024-25-changes-to-tax-slabs-increased-standard-deduction-and-other-changes-to-direct-taxation/articleshow/111951205.cms" target="_blank"></a> <a href="https://www.businessinsider.in/budget/news/budget-2024-25-changes-to-tax-slabs-increased-standard-deduction-and-other-changes-to-direct-taxation/articleshow/111951205.cms" target="_blank">Budget 2024-25 – Changes to tax slabs, increased standard deduction and other changes to direct taxation</a> <a href="https://www.businessinsider.in/budget/news/union-budget-2024-live-updates-finance-minister-nirmala-sitharaman-key-announcements-23-july/liveblog/111942008.cms" target="_blank">Budget 2024 Live Updates: FM Sitharaman announces comprehensive review of the Income Tax Act 1961</a><a href="https://www.businessinsider.in/business/news/expectations-from-union-budget-2024-25-how-will-this-budget-impact-you/articleshow/111946291.cms" target="_blank"></a> <a href="https://www.businessinsider.in/business/news/expectations-from-union-budget-2024-25-how-will-this-budget-impact-you/articleshow/111946291.cms" target="_blank">Union Budget 2024-25: How will this budget impact you?</a>

Govt to abolish angel tax on investments in startups

<div class="KonaFilter image-container display-table"><div><div class="image on-image">Thomas Barwick/Getty ImagesAngel investors participate in very early funding rounds for companies they perceive to have high-growth potential.</div></div></div><ul class="summary-list"><li>Angel investing is a high-risk strategy, and there are no guarantees it'll pay off.</li><li>Four successful angel investors with varying areas of expertise shared insights with Business Insider into both how to get started in angel investing and how to succeed once you're in it.</li><li>These experts recommended finding a niche, setting a budget, and keeping your expectations low to start out.</li><li>They also suggested studying the landscape and reading books like "Zero to One: Notes on Startups, or How to Build the Future" by Peter Thiel and "The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers" by Ben Horowitz.</li><li><a href="https://www.businessinsider.com/prime?module=article&amp;area=summary">Click here for more BI Prime stories.</a></li></ul>Angel investors participate in very early funding rounds for companies they perceive to have high-growth potential - typically pre-revenue and before they're backable by more traditional venture investors - in exchange for equity ownership interest. Oftentimes, angels have a deep passion for, and experience in, specific industries, which helps them get comfortable with the very risky capital they're deploying.According to the <a href="https://blog.hockeystick.co/2019-u.s.-angel-investment-statistics">2019 Angel Funders Report</a> co-authored by the Angel Capital Association and Hockeystick, the median pre-money valuation of an angel-backed deal in 2019 was $6 million, up 20% from 2017. However, angel investors, generally speaking, provide more than just personal capital but also mentorship, advice, connections, insights, support, and more to early-stage companies.But it's certainly not for the faint of heart. Four angel investors shared with Business Insider their expert insights into both how to get started in angel investing and how to succeed once you're in it.<h1>Find a niche and invest where you can add value</h1>Most angel investors have a background and interest in a particular category, which is where they choose to invest their time and money.For Coco Meers, now the founder of <a href="https://myeq.com/">Equilibria</a> - a female-focused CBD brand - angel investing was a way to stay connected with early-stage founders after she sold her first company, beauty-booking app PrettyQuick, to Groupon in 2015. She missed the creative stages of building a business post-exit, and early-stage founders are often in the throes of creating their models and go-to-market approaches.<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">Courtesy of Coco MeersCoco Meers.</div></div></div>"Through my angel vehicle, Rebelle Collective, I invest in women founders who have demonstrated attractive customer economics in high-growth consumer markets," said Meers. Her investments include <a href="https://www.ezzanails.com/">Ezza Nails</a>, which is reinventing the nail salon experience; direct-to-consumer travel brand <a href="https://tourparavel.com">Paravel</a>; and <a href="https://www.pearchef.com/">PearChef</a>, a private chef in luxury apartments, among others.<a href="https://www.kimperell.com/">Kim Perell</a>, entrepreneur, national bestselling author, and tech CEO, became an angel investor to pay it forward to those who helped her get where she is today. "As an entrepreneur, I know how lonely it can be," said Perell. "When I started my first company, I was broke and unemployed, and trying to convince anyone to lend me money was an uphill battle. Thankfully, my 80-year-old grandmother made a bet on me. My goal is to pay it forward by investing in entrepreneurs who need someone to believe in them. My passion in life is to support others in achieving their dreams."She now works within the tech, real estate, and beauty spaces - and to date, she's invested in over 70 different startups, including Humin, which was <a href="https://www.prnewswire.com/news-releases/tinder-acquires-humin-300242335.html">acquired by Tinder</a> in 2016; Gradient X, which was <a href="https://techcrunch.com/2013/09/05/singtels-amobee-buys-las-gradient-x-to-bulk-up-its-mobile-adtech-with-real-time-bidding/">acquired in 2013</a> by SingTel for $20 million; and Adconion, which was also <a href="https://techcrunch.com/2014/06/10/amobee-buys-adconion-for-235m-and-kontera-for-150m-in-consolidation-play/">acquired by SingTel in 2014</a> for $235 million.Chris Barbin had worked with six angel investors while at <a href="https://appirio.com/">Appirio</a>, an information technology consulting company, who inspired him to pursue angel investing after he exited the company three years ago to cofound <a href="https://siptequila.com/">SipTequila.com</a>, a direct-to-consumer platform bringing hand-curated, super-premium and boutique tequilas to market in the United States. Today, he focuses on business-to-consumer (B2C) companies and small- and medium-sized businesses (SMB) after spending his career in business-to-business (B2B) companies and larger enterprises. His investments include <a href="https://www.southerngristbrewing.com/">Southern Grist Brewing</a>, a Nashville taproom; <a href="https://www.f6s.com/youbet.io">YouBet.io</a>, an online destination for horse racing; and <a href="https://www.plushcare.com/">PlushCare</a>, a telemedicine platform."To me, what's most important is finding the intersection of a product or service I can personally get excited about [and] where I can have an outsized impact on their behalf," said Barbin. Basically, your relationship with a founder should be a two-way street in terms of benefits.Phin Barnes has been a partner at leading early-stage investment fund <a href="https://firstround.com/">First Round Capital</a> since May 2012, which <a href="https://news.crunchbase.com/news/first-round-capital-targets-200m-for-seventh-flagship-fund/">reportedly raised approximately $220 million</a> between two new venture funds last year. He added that you should be clear about what you have to offer to founders besides money, and make sure the founders understand the product they are buying from you."This clarity will lead to more effective partnerships and help you build a group of founders who can serve as references for you as an investor," he said.That said, Barbin advised angel investors to remember that entrepreneurs don't always necessarily want, or need, your unsolicited expertise."Don't be a 'board member' to an entrepreneur who you give angel money to," he explained. "Give them advice, guidance, and insights if they directly ask. But, if not, remember that, at this stage, they are probably running hard, fast, and are stressed enough."<h1>Adopt the mindset of investing in people, not an idea</h1><div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">Phin Barnes / First Round CapitalPhin Barnes.</div></div></div>Barnes loves working with founders, and he believes that founders, not venture capitalists, predict the future needs of their customer, the future of the market they will dominate, or the future emergence of the category they will define. A good investor, he says, understands that."At First Round, we look to founders to teach us what's next," he said. "We were fortunate to invest in Uber before the rise of the on-demand economy and Roblox before games were social platforms. We invested in Blue Apron before everyone jumped into food tech and Notion before 'no-code/low-code' was a trend."In all of these cases, Barnes met the founders when they were just starting out, identified with their vision, and believed in their ability to create and capture the market they were attacking."I look for founders with enough self-awareness to know they are trying to build an outlier company, but also to recognize that their work is a continuous battle for self-improvement and for growth as a leader and as a person," said Barnes. "I love working with the relentless founder with a clear vision, where I think, 'If anyone is going to win, it's this person.'"Ultimately, angel investing is about betting on people - so backing those you trust and believe in makes all the difference."I look for entrepreneurs that are willing to put skin in the game, which doesn't always have to be monetary because they might not have the capital," said Perell. "I look for people with passion, tenacity, resilience, and energy to keep moving forward long after everybody else would give up, someone who knows how to execute."This goes for the company's employees and leadership as well as its founders. Perell would rather invest in a great team and a mediocre idea than a great idea with a mediocre team."Two people can have the same idea, but the one who executes best always wins," she said. "It isn't about intelligence or education either. The key to finding success as an entrepreneur is execution. Execution is the ability to do and get results, to keep moving forward to achieve your vision and goals despite the obstacles that lay ahead. This one skill is the difference between success and failure."<h1>Ask some tough questions about the company's potential</h1>While it's easy to get excited about being part of a company's first stages, Meers said there are a few difficult questions you should ask yourself before you consider investing:<ul><li>Do you truly understand the financial model? Could this business ever really be profitable?</li><li>Do you have conviction in the founding team? Are they truly the right team to beat the odds and make this company a success?</li><li>What are the existential risks? What's lurking out there that could cause this company to fail even when the founders make all the right moves?</li></ul>"It's not just about the passion in what they're doing but also what they are willing to suffer to achieve that vision," added Perell. This, she said, includes founders and investors taking the time to do the research and understand the commercial and financial models to know the risks involved in starting a business. She also bets on entrepreneurs who have tried to exercise their idea and can provide two proofs of concept or pilot programs."If an entrepreneur does not understand their market, the demands, or the challenges, I would not invest in them," she explained. "The most successful companies and entrepreneurs also have vision to stay ahead of the curve and understand changing dynamics." <h1>Set a budget and keep your expectations low</h1>Barnes likens divvying up your starting angel investments to a craft. "When you commit to a craft, you should think about how much time and other resources you are willing to put toward building mastery of the craft," he said. "Think of the total budget as tuition rather than an investment that will generate returns and identify a number that is comfortable for you."Early on, he suggested making more investments rather than making larger investments. "In fact, I think the best thing to do is make every investment a standard size rather than allowing your excitement level at the time of investment to dictate the amount of money you invest," said Barnes.Don't just make one investment either, he added. "When you first get started, you are much better off writing 10 small checks than two or three bigger ones. You will learn more with repetition and breadth of experience. The odds are that your first check won't be going to a category-defining company, but it is the best way to learn about the process of angel investing and what it's like to work with founders," he explained.Perell said that the typical angel investment is anywhere from $25,000 to $150,000. Like Barnes, she recommended building a portfolio of a minimum of 10 investments, in order to have a diversified portfolio.<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">Courtesy of Kim PerellKim Perell.</div></div></div>On average, Barbin said that his personal investments range from $25,000 up to $250,000. "We set multi-year goals with our long-time trusted financial advisor for these higher risk 'personal venture' bets versus philanthropy versus a more traditional portfolio management approach, which, in our case, is relatively conservative overall," said Barbin.There are no guarantees in angel investing, so for Barbin, any returns are 100% upside, no matter how small."Set a budget as a percent of your net worth, and stick to it," he said. "If you subscribe to the 'they all go to zero' rule [that the investment won't pay out], then it's probably 10 to 20% at most."Meers agreed that angel investing requires being willing to take some big risks - and accept some financial losses. "While I'm always optimizing for return, I've certainly said goodbye to some checks," she said.<h1>Understand which other investors are in the early rounds, and don't shy away from later rounds either</h1>Generally, Perell said, the company seeking investors will disclose who else is investing. "You can understand more about the entrepreneur by understanding who their investors are," she explained.Meers added that equity is an expensive form of capital for founders to take on. "The tradeoff that founders are making is that the investor partners are bringing a myriad of skill sets to bear that will ultimately increase the odds of success, from network and strategy to operating advice at scale," she said. "Understanding who the other investors are in a deal is therefore an important data point to understanding what tailwinds the founders have on their team."<div class="KonaFilter image-container display-table float_right"><div><div class="image on-image">Courtesy of Chris BarbinChris Barbin.</div></div></div>Barbin said that aspiring angel investors should look for other successful operators or proven angels in the round by investigating them via LinkedIn, Crunchbase, and on social media; noting the deals they've invested in in the past and how they've trended; and speaking directly to entrepreneurs or CEOs who've worked with them previously when considering whether to invest.And, he continued, stay away if the other angels are, for example, aunt Betty, uncle Billy, mom, dad, and you. "If the other investors are all family, the plan and business may not have gone through any level of rigorous diligence, questioning, or vetting," he said. "This is not always a bad sign, but it does up my level of investigation and diligence."Finally, he added that if you have access to an amazing company that happens to be later stage, there's no reason not to invest as an angel in later rounds. "It can often be easier for the founder to find room for you in a later round," he explained. <h1>Study up</h1>Angel investing is typically the riskiest type of investment for investors, so Perell recommended starting in areas where you're savvy and have expertise and also joining online angel investment groups like <a href="https://angel.co/">Angel List</a> and <a href="https://www.angelcapitalassociation.org/directory/">Angel Capital Association</a>.Barnes suggested reading Nike creator Phil Knight's memoir "<a href="https://www.amazon.com/Shoe-Dog-Memoir-Creator-Nike/dp/1501135910/ref=tmm_hrd_swatch_0">Shoe Dog</a>" as a "great reminder of how long it takes to build an enduring business and how hard it is." He also follows the writing and movements of investors Ron Conway, Reid Hoffman, Marc Andreessen, and Jim Goetz and is a fan of "<a href="https://www.amazon.com/Zero-One-Notes-Startups-Future/dp/0804139296">Zero to One: Notes on Startups, or How to Build the Future</a>" by Peter Thiel and "<a href="https://www.amazon.com/Hard-Thing-About-Things-Building-ebook/dp/B00DQ845EA">The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers</a>" by Ben Horowitz, touting the books as "must-reads for angels and entrepreneurs alike."Barnes' company First Round also offers <a href="https://angeltrack.firstround.com/">Angel Track</a>, a program that brings together a community of established operators and founders looking to develop their skills and identities as early-stage investors in San Francisco and New York."They hear from the best in the industry and learn that investing is about more than just writing a check," he said. "It's about being a resource for feedback, advice, and capital to founders."He added that "Regardless of the entry point, whether it's Angel Track or programs like it, angel investing is what you make of it and the best way to start is to write that first check." <div class="margin-top"> <h3>NOW WATCH: <a href="https://www.businessinsider.com/what-happens-when-run-marathon-2017-5">4 terrible things that happen to your body when you run a marathon</a></h3> <div> </div> </div>

4 investors explain how to get started in angel investing - and how to succeed once you're in it

<table class="image-container float_right" width="200"><tr><td><div class="image"></div>Getty Images</td></tr></table>The Los Angeles Angels made two of of the biggest free agency signings of the last two off-seasons in <keyword id="1080555" type="PERSON" weightage="60" keywordseo="Albert-Pujols">Albert Pujols</keyword> and <keyword id="907990" type="UNKNOWN" weightage="60" keywordseo="Josh-Hamilton">Josh Hamilton</keyword>. But so far this season, Pujols and Hamilton have looked more like two big mistakes.
It's still early in the first season of Hamilton's 5-year, $125 million contract, but so far his .208 batting average ranks 85th out of 98 batters in the American League (AL) with enough plate appearances to qualify. And his -0.6 Wins Above Replacement (WAR) is 92nd in the AL.
In addition, he is on pace to hit just ten home runs this season. Not good for a hitter that has averaged 33 home runs the past three seasons.
Likewise, Pujols is hitting just .237 with five home runs and a -0.2 WAR. But more concerning is his health.
Pujols, who has nearly nine years remaining on his 10-year, $240 million contract, is battling a foot injury that has limited him to designated hitter duties in nearly half of his team's games.
The Angels think the injury (plantar fasciitis) will improve over the course of the season, however, <a href="http://espn.go.com/los-angeles/mlb/story/_/id/9198218/albert-pujols-says-ailing-foot-hurting-real-bad">Pujols admits he is playing in a great deal of pain</a>, and is visibly limping when he moves.
Hamilton has plenty of time to get things going with his bat, so he should improve. But at age 33, Angels fans need to be concerned with the long-term health and production of Pujols. He wouldn't be the first power hitter to see his production plummet in his mid-30s.

The Los Angeles Angels Are Receiving Little Return On A $365 Million Investment In Pujols And Hamilton

<ul class="summary-list"><li><keyword id="6365770" type="UNKNOWN" weightage="60" keywordseo="angel-investors">Angel investors</keyword> are high-net-worth individuals who provide funding to startups, usually in exchange for shares in the company.</li><li>Unlike venture capitalists, angels use their own money; they also invest in much smaller, younger enterprises</li><li><keyword id="138263" type="PERSON" weightage="60" keywordseo="startup">Startup</keyword> founders benefit from angels' expertise as well as money, but they have to surrender some ownership and management control in return. </li></ul>New companies need money to get off the ground, of course. But where to find it? Banks tend to shy away from infant enterprises. And despite all the ink spilled about venture capital funding, just .05% of new businesses raise money from VCs, <a href="https://www.fundable.com/infographics/startup-funding" target="_blank" rel="noopener">according to Fundable.</a>That's where angel investors (angels for short) come in. Typically wealthy individuals with cash to burn, an interest in entrepreneurship, and a healthy appetite for risk, these investors fund over 63,000 startups a year, for a total of more than $23 billion, according to the Center for Venture Research at the University of New Hampshire.In fact, over the years, as investor interest has grown, angels have become a primary source of funding for many early-stage startups.<h2>What is an angel investor?</h2> Angel investors generally are high-net-worth individuals who provide funding to startups in exchange for convertible debt (bonds) or equity (shares) in the company. The term is actually borrowed from show business: Angels originally was an affectionate nickname for backers of Broadway shows, whose money was manna from heaven for struggling artistes.Angels generally fill the gap between financing from friends and family — usually, the first sources of funds, when a startup is mostly a twinkle in an entrepreneur's eye — and venture capitalists, professionals who enter the scene after a company is up and running.Typically, angels aren't just wealthy investors, they're also accredited investors. That's defined by the SEC as people with an annual income of over $200,000 ($300,000 for joint income) for the last two years or a net worth exceeding $1 million in investable assets (excluding the primary residence), either on their own or with a spouse. As of August 2020, angels can also include individuals holding professional credentials, like a Series 7, 65, or 82 license.<h2>How angel investors work</h2>Unlike venture capitalists, angels usually aren't in the investment field full-time. Instead, they're usually drawn from the ranks of business owners, well-to-do professionals (doctors, lawyers), and other deep-pocketed individuals who can invest $50,000 or so in a promising startup. Often, they're seasoned entrepreneurs who've built successful companies and want to help the next generation with hands-on advice and the benefits of their experience, while potentially making a good return.Typically, an angel gets an ownership stake in the company in exchange for their investment, as well as the chance to offer advice and guidance to the founders. Then five to seven years later, if all goes well, they'll expect to make a tidy profit when the startup either goes public or finds a buyer.But the chances of any one investment reaping super big rewards are slim. So angels also are investors willing to take an educated gamble. But they don't have to be all that rich these days. That's thanks to the <a href="https://www.sec.gov/spotlight/jobs-act.shtml" target="_blank" rel="noopener">Jumpstart Our Business Startups (JOBS) Act of 2012</a>, which allows more ordinary people to invest in startups via crowdfunding platforms. The amount investors can invest is limited by their income and net worth. Thus, if investors' annual income or net worth is less than $107,000, they can invest either $2,200 or 5% of the lesser of their income or net worth, per year. Also, companies can raise only around $1 million in a one-year period from a crowdfunding source.<h2>Characteristics of angel investors</h2>Aside from typically being high-net-worth individuals, angel investors also share other key qualities:<ul><li>Looking out for the team. Angels tend to veer toward startups that have been recommended to them or are in industries they know well, with the potential to grow rapidly. They also often want to see a working prototype and a clear business plan. But most important to them, is the passion, savvy, and bona fides of the founding team.</li><li>Seeking safety in numbers. Unless you're super angel <a href="https://www.businessinsider.com/famous-silicon-valley-investor-ron-conways-brilliant-8-step-method-for-making-boatloads-of-money-2013-1" target="_blank" rel="noopener">Ron Conway</a>, developing a healthy pipeline of quality deals isn't easy. That's why they often don't fly solo: Increasingly angels operate in what's known as angel groups, where they can pool their capital along with other accredited investors, raising the total investment level and lowering their personal exposure. In some cases, multiple angel groups join together in syndicates, thereby broadening their reach. There are now more than 400 angel groups around the country. They're typically organized by geography; some biggies include New York Angels, Houston Angel Network, and Tech Coast Angels. Plus, many angel groups co-invest with other angel groups, individual angels, and even early-stage venture capitalists to make investments of $500,000 to $2 million per round.</li><li>Choosing favorites. Generally speaking, angels flock to certain fields and industries. These include software, the internet, and healthcare, along with mobile and telecom, according to <a href="https://angelresourceinstitute.org/reports/HALO-2019-%20October-2020-Update.pdf" target="_blank" rel="noopener">the Halo Report</a>. Energy and utilities, electronics, and consumer products and services are also popular.</li><li>Relishing risk. Angels tend to look for returns of about 25% or more over a period of five or so years via an initial public offering or an acquisition. But make no mistake: These are super-risky deals. The best estimate for investor returns, according to the Kauffman Foundation, is 2.5 times their investment, with the odds of a positive return less than 50%. So it might not be surprising to hear that only about 10% of most angels' total portfolios are in these startup investments.</li></ul><h2>Angel investors vs. venture capitalists</h2>At first glance, angels and venture capitalists seem similar: Both fund young companies in return for ownership. But, in many ways, they're different breeds. As noted earlier, angels aren't full-time investment pros. Angels usually use their own money, although they typically provide funds through such vehicles as an LLC or a trust, and they tend to focus on fledgling firms — smaller operations than VCs would consider. (In fact, selling their stake to a VC firm is one of the "positive exits" angels hope for). The average investment made by individual angels for 2019 was $73,700 and the average deal size was $374,225, according to the <a href="https://scholars.unh.edu/cgi/viewcontent.cgi?article=1032&amp;context=cvr=cvr">Center for Venture Research at the University of New Hampshire</a>.VCs, on the other hand, pool money from outside sources, like pension funds and insurance companies, and then manage it in a fund. They also typically invest the lion's share of their money in companies that are further along in their development. And their investments are bigger. For example, the median sum for a Series A round — the second stage of startup financing, when venture capital firms tend to get involved — is almost $16 million, <a href="https://www.fundz.net/what-is-series-a-funding-series-b-funding-and-more#intro" target="_blank" rel="noopener">according to Fundz</a>. Plus, VCs charge hefty fees — typically around 2% in management fees and 20% of profits, usually above a certain hurdle.<h2>The upsides of using angel investors </h2>For entrepreneurs, angel funding has several benefits.<ul><li>No debt. Since they don't have to take out a loan, entrepreneurs aren't on the hook for paying anything back. That's especially helpful should the company head south.</li><li>Access to expertise. Smart entrepreneurs look for angels with a wealth of business experience they can tap. Particularly useful are investors who have founded successful companies themselves.</li><li>Less paperwork. Companies that raise financing from angel investors are exempt from a variety of filings with SEC and state securities regulators.</li><li>More money down the line. Once angels invest, there's a pretty good chance they'll add another cash infusion later on, in another funding round. </li></ul>The big downside of angel funding? Loss of control. Recipient firms have to give away anywhere from 10% to 50% of the business to the angel. That also means potentially losing some say over how the company is run, since investors will, by all rights, be entitled to play a role in business decisions. <h2>The financial takeaway</h2>Although VC firms get all the attention, it's angel investors who really form the bedrock of funding for fledgling startups. Angels, in fact, can be a godsend for cash-starved companies that aren't ready —and may never be ready — for venture capital. Plus, they offer invaluable expertise and connections to entrepreneurs who desperately need them.Ultimately, however, enterprises in the sectors popular with angels raise the most money from these folks. That means companies in less-favored industries need to look elsewhere.As for angels who want to get a piece of the most promising action, joining an angel group can provide the best access to deal flow. At the same time, while these high-risk investments can sometimes result in hefty profits, angels don't count on that happening. Ultimately, for many angels, it's the thrill of participating in a promising venture's early development that provides the biggest return.<h2>Related Coverage in <a href="https://www.businessinsider.com/investing-reference" target="_blank" rel="noopener">Investing</a>:</h2><h3><a href="https://www.businessinsider.com/top-business-news-angel-investors-streaming-stars-top-bankers-2020-2" target="_blank" rel="noopener">Meet the 'super angel' investors, the power players of streaming, and the top M&amp;A bankers of 2019</a></h3><h3><a href="https://www.businessinsider.com/parlers-investors-include-a-big-angel-investor-and-a-pro-trump-pundit-2020-11" target="_blank" rel="noopener">Social media app Parler is the new darling of conservatives, backed by a successful tech angel investor and a pro-Trump pundit. It hopes to raise more money soon.</a></h3><h3><a href="https://www.businessinsider.com/solo-general-partners-raising-outside-capital-2020-1" target="_blank" rel="noopener">The 19 'super angel' investors writing lots of checks that every founder should scramble to pitch</a></h3><h3><a href="https://www.businessinsider.com/how-to-get-started-in-succeed-angel-investing" target="_blank" rel="noopener">An expert's guide to getting started in angel investing — and succeeding once you're in it</a></h3><h3><a href="https://www.businessinsider.com/angel-investor-reveals-2-prerequisites-for-billion-dollar-startups-2020-8" target="_blank" rel="noopener">An angel investor who has backed nearly 500 companies reveals the 2 criteria your business idea must meet to turn into a billion-dollar startup</a></h3>

What is an angel investor? Who they are, what they do, and how they help startups grow

(Image source- TnH Global) <ul><li>In the last month or so, India’s <keyword id="6354751" type="UNKNOWN" weightage="20" keywordseo="income-tax">Income Tax</keyword> Department has issued notices to around 150 <keyword id="1397791" type="PERSON" weightage="20" keywordseo="early-stage">early-stage</keyword> startups requiring them to reconcile outstanding taxes on the angel funds they have received. </li><li>As per the <keyword id="6406536" type="UNKNOWN" weightage="20" keywordseo="Angel-Tax">angel tax</keyword> policy, startups have to pay a 30.9% tax on the positive difference between their valuation post-investment and their FMV, which is classified as “income from other sources.” </li><li>Following a wave of backlash over this policy, Suresh Prabhu, the Minister of Commerce and Industry, tweeted that the <keyword id="26362" type="ORGANIZATION" weightage="20" keywordseo="Government">government</keyword> had “taken up the issue”. The Central Board of Direct Taxation is currently said to be looking into the matter. </li></ul>In the last month or so, India’s Income Tax Department has issued notices to <a href="https://www.bloombergquint.com/technology/indian-startup-founders-lose-sleep-over-angel-tax">around 150 early-stage startups</a>, requiring them to reconcile outstanding taxes on the angel funds they have received. The so-called “angel tax” applies to <keyword id="138263" type="PERSON" weightage="20" keywordseo="startup">startup</keyword>s incorporated before 2016. It relates to the discrepancy between the valuation of a startup, once it receives angel investments, and it’s actual “fair market value” (FMV). Income tax officials calculate the FMV using traditional methods such as the discounted cash flow model that doesn’t take into account intangible assets like “goodwill” and therefore, undervalues the company. As per the policy, startups have to pay a 30.9% tax on the positive difference between their valuation post-investment and their FMV, which is classified as “income from other sources.” Startups incorporated after 2016 under the government’s <a href="https://www.startupindia.gov.in/">Startup India programme</a> are exempt from the tax. Following a wave of backlash over this policy, Suresh Prabhu, India’s Minister of Commerce and Industry, <a href="https://twitter.com/sureshpprabhu/status/1075057424954843137">tweeted</a> on 19 December that the government had “taken up the issue.” The Central Board of Direct Taxation is currently said to be looking into the matter. Prabhu was directly responding to a link to <a href="https://entrackr.com/2018/12/draconian-angel-tax-torture-startups/">an article </a>shared by Mohandas Pai, the chairman of Manipal Global Education, that referred to the taxation policy as “draconian” and a hindrance to innovation. However, the Income Tax Department has maintained that it has only sent notices to companies with financial irregularities since the tax is geared towards <a href="https://www.livemint.com/Companies/hiAMmBRlIu7HxLyulkG6sK/Government-says-genuine-investments-in-startups-will-not-be.html">preventing money laundering </a>and payments to politicians in the form of shares in these unlisted companies. The angel tax has reportedly deterred angel <keyword id="6359051" type="UNKNOWN" weightage="20" keywordseo="investors">investors</keyword> from infusing funds into startups for fear of losing a significant chunk of their investment to the taxman. Entrepreneurs and investors had been hoping for a revision of the policy in the Indian government’s Union Budget for 2018-19 but it didn’t come to pass. A modicum of relief came in April this year when the government excluded startups from the angel tax in the event that the funds raised from angel investors were <a href="https://economictimes.indiatimes.com/small-biz/startups/newsbuzz/definition-tweaked-startups-can-seek-exemption-from-angel-tax/articleshow/63741292.cms">₹100 million or less</a>, subject to the approval of an eight-member ministerial committee. Speaking on the tax notices issued to the 150 or so startups, an official from the Income Tax Department told <a href="https://indianexpress.com/article/business/startups/tax-notices-to-startups-have-taken-up-the-issue-says-suresh-prabhu-5501258/">the Indian Express</a> that it could pertain to those startups that aren’t registered with the <keyword id="6365809" type="UNKNOWN" weightage="20" keywordseo="commerce-ministry">commerce ministry</keyword>’s Department of Industrial Policy and Promotion (DIPP). SEE ALSO: <a href="https://www.businessinsider.in/these-are-the-25-most-sought-after-startups-in-india-report/articleshow/65866420.cms">These are the 25 most sought after startups in India: Report</a> <a href="https://www.businessinsider.in/the-youth-boardroom/the-problems-indian-startups-are-facing/videoshow/57129825.cms">The problems Indian startups are facing</a>

The Indian government may roll back a tax on angel investments that is said to be hurting the country’s startup ecosystem

India is evidently witnessing a surge in <keyword id="107737" type="ORGANIZATION" weightage="20" keywordseo="Entrepreneurship">entrepreneurship</keyword> with new and innovative startups mushrooming in every sector possible, and some of them are even creating new categories. 
 
Investors, today, are more open towards investing in an innovative idea than ever before. However, it is also crucial for entrepreneurs to understand the investors’ psyche in order to succeed in their pitch to raise capital. 
 <keyword id="6365770" type="UNKNOWN" weightage="20" keywordseo="angel-investors">Angel investors</keyword> who are investing in businesses could have multiple objectives. While some are looking to make a difference by supporting unique business ventures, which have a potential to bring about a societal change, others are looking for a way to give back to the community by sharing their knowledge of running a business or just as a means of staying connected to their industry. 
 
Then there are those who are looking purely for a good return on investment. 
 
In all cases, the secret to their success is to put their money in businesses that will pay highest returns. Intelligent investors always plan to exit the businesses they invest in, typically, three to five years, which means they have an exit strategy even before they begin their journey with the startup. Although, an angel investor is open to taking risks but with high levels of expectations from the entrepreneurs’ abilities to run the business and make it profitable. There are some traits that are common amongst most angel investors. 
 
Play as a team 
Most professional angel investors invest as part of a team. This ensures that when they invest in a business, thorough evaluation and validation of the business model is done collectively. The investors, collectively, also bring along experience of having seen several businesses grow, hence entrepreneurs get access to the resources and advisory that they bring along. However, it is important to remember that they will only work behind the curtains. 
 
Reliable mentor 
Successful angel investors mostly have lot of knowledge and experience by having worked very closely with several businesses, however, remain highly enthusiastic about learning new things. This makes them a reliable knowledge pool and think-tank for the entrepreneurs which they can utilise by frequently consulting them on their business plans. 
 
Strategists 
Investing into businesses with an unpredictable future is a considerably big risk which is definitely not an easy decision. While the investors are ready to take that risk, they, in most cases, have a strategy in mind for the venture to be able to give healthy returns. It is important for any entrepreneur to understand and align business strategies with the assumptions and expectations of the investors to avoid difference of opinions at any stage. This can only happen through constant discussions and counseling. 
 
It is clear that an angel investor will not invest into a business till he/she is totally convinced of its potential to be profitable. They will not necessarily ask, but it is important for the entrepreneur to answer the questions they might have in their minds. There are few key criteria that they evaluate the business models on. 
 
The core 
The core of any venture is the idea behind it and it is crucial that it has the potential to create space for itself in the market, all the more important in a competitive market like India. The business should either be addressing a prevalent need or be able to create a segment in itself. Scalability and a considerable prospective consumer base are also important for future expansion. 
 
Ability of the entrepreneur 
Businesses are run by people and investors understand this fact very well. Hence, it is almost certain that any investor will assess and evaluate the people involved with a venture before investing in it. Investors prefer associating with people who are not just passionate about the idea but also have the skill sets to carry out the business. This is one of the most crucial aspects that I judge start-ups on, before associating with them. Since most investors are seasoned entrepreneurs themselves, they prefer associating with teams who are open to learning from their experiences also. 
 
A convincing presentation 
Any successful investor goes through a large number of business plans on a daily basis and does not always have the luxury of time while evaluating one. Hence, it is crucial to present the business model in the most effective, realistic way highlighting the most important aspects of the business like the core idea, market scenario, go-to-market approach and details of the financials. This helps them get the complete picture in a snapshot, hence enabling them to take an informed decision. 
 
Profitability 
Return on investment is an investor’s aim from associating with the start-up venture; hence, this becomes the most crucial aspect for them. It is important to show them a realistic picture of the possible returns and profitability of the business model in order to help them take a decision. While most investors prefer investing in the industry of their experience, however, are usually open to exploring newer and promising industries. 
 
The exit route 
As I have mentioned above, angel investors plan their exit well before entering a venture, hence they are constantly planning ahead. Most of them have a well thought of time-period in mind for their exit which can be anything from three to five years. 
 
(The article has been authored by HCL Founder Ajai Chowdhry) 
 
(Image: Thinkstock)

8 common traits of angel investors when they begin their journey with startups

India is evidently witnessing a surge in entrepreneurship with new and innovative startups mushrooming in every sector possible, and some of them are even creating new categories. 
 Investors, today, are more open towards investing in an innovative idea than ever before. However, it is also crucial for <keyword id="53533" type="UNKNOWN" weightage="20" keywordseo="entrepreneurs">entrepreneurs</keyword> to understand the investors’ psyche in order to succeed in their pitch to raise capital. 
 <keyword id="6365770" type="UNKNOWN" weightage="20" keywordseo="angel-investors">Angel investors</keyword> who are investing in businesses could have multiple objectives. While some are looking to make a difference by supporting unique business ventures, which have a potential to bring about a societal change, others are looking for a way to give back to the community by sharing their knowledge of running a business or just as a means of staying connected to their industry. 
 
Then there are those who are looking purely for a good return on investment. 
 
In all cases, the secret to their success is to put their money in businesses that will pay highest returns. Intelligent investors always plan to exit the businesses they invest in, typically, three to five years, which means they have an exit strategy even before they begin their journey with the startup. Although, an angel investor is open to taking risks but with high levels of expectations from the entrepreneurs’ abilities to run the business and make it profitable. There are some traits that are common amongst most angel investors. 
 
Play as a team 
Most professional angel investors invest as part of a team. This ensures that when they invest in a business, thorough evaluation and validation of the business model is done collectively. The investors, collectively, also bring along experience of having seen several businesses grow, hence entrepreneurs get access to the resources and advisory that they bring along. However, it is important to remember that they will only work behind the curtains. 
 
Reliable mentor 
Successful angel investors mostly have lot of knowledge and experience by having worked very closely with several businesses, however, remain highly enthusiastic about learning new things. This makes them a reliable knowledge pool and think-tank for the entrepreneurs which they can utilise by frequently consulting them on their business plans. 
 
Strategists 
Investing into businesses with an unpredictable future is a considerably big risk which is definitely not an easy decision. While the investors are ready to take that risk, they, in most cases, have a strategy in mind for the venture to be able to give healthy returns. It is important for any entrepreneur to understand and align business strategies with the assumptions and expectations of the investors to avoid difference of opinions at any stage. This can only happen through constant discussions and counseling. 
 
It is clear that an angel investor will not invest into a business till he/she is totally convinced of its potential to be profitable. They will not necessarily ask, but it is important for the entrepreneur to answer the questions they might have in their minds. There are few key criteria that they evaluate the business models on. 
 
The core 
The core of any venture is the idea behind it and it is crucial that it has the potential to create space for itself in the market, all the more important in a competitive market like India. The business should either be addressing a prevalent need or be able to create a segment in itself. Scalability and a considerable prospective consumer base are also important for future expansion. 
 
Ability of the entrepreneur 
Businesses are run by people and investors understand this fact very well. Hence, it is almost certain that any investor will assess and evaluate the people involved with a venture before investing in it. Investors prefer associating with people who are not just passionate about the idea but also have the skill sets to carry out the business. This is one of the most crucial aspects that I judge start-ups on, before associating with them. Since most investors are seasoned entrepreneurs themselves, they prefer associating with teams who are open to learning from their experiences also. 
 
A convincing presentation 
Any successful investor goes through a large number of business plans on a daily basis and does not always have the luxury of time while evaluating one. Hence, it is crucial to present the business model in the most effective, realistic way highlighting the most important aspects of the business like the core idea, market scenario, go-to-market approach and details of the financials. This helps them get the complete picture in a snapshot, hence enabling them to take an informed decision. 
 
Profitability 
Return on investment is an investor’s aim from associating with the start-up venture; hence, this becomes the most crucial aspect for them. It is important to show them a realistic picture of the possible returns and profitability of the business model in order to help them take a decision. While most investors prefer investing in the industry of their experience, however, are usually open to exploring newer and promising industries. 
 
The exit route 
As I have mentioned above, angel investors plan their exit well before entering a venture, hence they are constantly planning ahead. Most of them have a well thought of time-period in mind for their exit which can be anything from three to five years. 
 
(The article has been authored by HCL Founder Ajai Chowdhry) 
 
(Image: Thinkstock)

8 things you must know about angel investors

<div class="KonaFilter image-container display-table"><div><div class="image on-image"><a href="http://www.flickr.com/photos/joi/2111843937/sizes/l/in/photostream/">Flickr/Joi</a>Ron Conway.</div></div></div><ul><li>Ron Conway, considered the "Godfather of Silicon Valley," said his venture capital firm, SV Angel, will not be raising a new fund.</li><li>In a Medium post co-authored by the firm's general partners, Conway said it will "scale back the existing SV Angel team" and shift focus to angel investing. He expects to cut checks between $25,000 and $100,000 per company.</li><li>Founded in 2009, SV Angel made early bets on Facebook, Twitter, and Airbnb.</li></ul> Ron Conway, one of the tech industry's most prominent and powerful startup investors, who had early stakes in Facebook, Twitter, and Airbnb, said in a <a href="https://medium.com/@abramdawson/a-fresh-perspective-on-seed-investing-f7ded55a9a2b">Medium post</a> on Thursday that his early-stage investment firm, SV Angel, will not be raising a new fund.Conway and his son, Topher, who co-manages the fund, said they will continue to use the SV Angel brand and cut checks - but in smaller amounts and as angel investors. "Writing smaller checks allows us to stay true to our DNA, remain nimble and fulfill our commitment to supporting founders. This approach and unmatched relationship network will continue to set us apart in our ability to support startups at every turn," said the letter, which was co-signed by the Conways, as well as general partners Brian Pokorny, Kevin Carter, and Robert Pollak.The letter described a changing ecosystem in tech investing - a space that has "gone through significant changes over the last 10 years."Seed funding was once a field in which angel investors and specialized firms invested tens of thousands, or hundreds of thousands of dollars in unknown startups. Since then, the competition and the prices have grown significantly. On Thursday for instance, San Francisco women's health startup Modern Fertility raised $6 million in seed funding (in a funding round that included SV Angel). While there were just a handful of funds investing in seed rounds when SV Angel launched in 2009, today, there are thousands of firms and individuals investing. In 2016, about 250 venture capital funds raised over $40 billion to deploy into startups, according to the <a href="https://nvca.org/pressreleases/2017-nvca-yearbook-highlights-busy-year-venture-industry-nvca/">National Venture Capital Association</a>.As billions and billions more dollars flowed into venture capital, it become tougher for some investors to compete for participation in a company's funding round. <h3>Here's the <a href="https://medium.com/@abramdawson/a-fresh-perspective-on-seed-investing-f7ded55a9a2b">Medium post</a> in full:</h3>"The investing ecosystem has gone through significant changes over the last 10 years. When we started SV Angel, there were just a handful of funds investing in seed rounds. We all worked together for the best outcome of founders and our early investments in companies like Twitter, Pinterest, Airbnb and Square were done in that spirit. We invested in great founders who pitched a compelling vision for the future, rarely having more than their word to invest on."Today there are thousands of firms and individuals investing in seed rounds. Seed investors are raising larger funds, becoming more ownership-focused and investing primarily on adoption and traction. Seed investing now encompasses both backing founders at the earliest stages of a company and investing in teams with early-adoption. The amount of money raised in seed rounds has doubled and valuations have increased significantly."As we thought about how best to serve founders in this environment, we also realized we no longer need to write big checks in order to help. There are many great investors that we'd like to partner with and being involved at any level in a company we like is more important to us than getting the right allocation for the fund."As this dynamic materialized more, we realized there were diverging interests between what's best for founders and what's best for our investors."For this reason, we have decided to go back to basics and invest as individual angels instead of raising a new fund. Ron and Topher will continue to use the SV Angel brand going forward, investing $25k - $100k per company. This allows us to better align ourselves with founders and other investors which is ultimately what' best for founders."With these changes, we will scale back the existing SV Angel team. Our partners, Brian Pokorny, Kevin Carter and Robert Pollak, will stay on as advisers to SV Angel. We all plan on remaining active members of the investing community and collaborating with each other on future investments."Ron and Topher will continue to co-manage the existing SV Angel funds to help founders and evaluate follow-on opportunities."Writing smaller checks allows us to stay true to our DNA, remain nimble and fulfill our commitment to supporting founders. This approach and unmatched relationship network will continue to set us apart in our ability to support startups at every turn."We know that if we continue to get behind the right people, success for us and the founders we support will follow."- Topher, Ron, Brian, Kevin, Robert" <div class="margin-top"> <h3>NOW WATCH: <a href="http://www.businessinsider.com/social-entrepreneurship-venture-capitalist-ross-baird-investing-2018-5">80% of startup money goes to 3 states - here's what one visionary is doing to help spread the wealth</a></h3> <div> </div> </div>

The 'Godfather of Silicon Valley's' investment firm, which helped launch Facebook, Twitter, and Airbnb, says it won't raise a new fund

<ul class="summary-list"><li>William Reeve is an entrepreneur who's been angel investing for the past 25 years.</li><li>When weighing up investment opportunities, he's looking for founders who'll listen well.</li></ul>This as-told-to essay is based on a transcribed conversation with William Reeve, 52, an angel investor based in North London. Reed is the CEO of the lettings platform <a target="_blank" href="http://Goodlord.co">Goodlord.co</a>, and a non-executive director of the homeware retailer Dunelm. One of the companies he founded, LOVEFiLM, a DVD rental and streaming business, <a target="_blank" href="https://www.businessinsider.com/amazon-lovefilm-2011-1">was acquired by Amazon in 2011</a> and reportedly valued at $312 million at the time. The following has been edited for length and clarity.I've been a fairly active <a target="_blank" class="" href="https://www.businessinsider.com/these-are-the-60-top-angel-investors-for-b2b-startups-2024-6">angel investor</a> for 25 years now.From a young age, I was a computer geek. In 1997, I set up my first business, Fletcher Research, researching the internet for large corporates. I was in the right place at the right time. My company <a target="_blank" href="https://uk.themedialeader.com/forrester-acquires-fletcher-research/">was acquired in 1999</a> for a life-changing amount of money.I didn't have a plan for that money.In the early 2000s, I loaned a university friend some money and from there, began making more investments. I had some connections with people I'd done a graduate program with at <a target="_blank" class="" href="https://www.businessinsider.com/mckinsey-ai-consulting-focus-future-2024-6">McKinsey</a> who had investment opportunities.Roughly four years after my first business was acquired, I cofounded LOVEFiLM, a DVD rental company. People I worked with there went on to run Zoopla, a well-known UK property website, which I invested in.I've made about 60 investments over my lifetime, including repeat investments and crowdsourcing. My ticket size is usually around £20,000, around $25,000. This is relatively small, but I've got a lot of experience that founders look for in <a target="_blank" class="" href="https://www.businessinsider.com/seed-100-best-early-stage-vc-investors-2024-5">investors</a>. I've built up a strategy for fielding opportunities over the years and learned about what makes a good investment.<h2 id="97712f69-8bfa-4a5c-8480-18f6eeaec799">I'm looking for entrepreneurs who I can help, not people who just want the money</h2>I'm generally looking to invest in companies where I have expertise to offer, either because tech is integral to their strategy or I can support their <a target="_blank" class="" href="https://www.businessinsider.com/entrepreneurship-guide-pitch-deck-startup-venture-capitalist-raise-money-2019-3">fundraising</a> and hiring.When I meet a founder, I look for their ability to listen; the best entrepreneurs are usually naturally curious and good listeners. There's nothing more frustrating than offering advice and being ignored. If a founder only wants money and has no intention of talking or listening, I tend to pass.I've reached out to companies I liked in the past, but it's rare. I mostly wait for people to pitch to me.One filtering mechanism I have is that <a target="_blank" class="" href="https://www.businessinsider.com/female-startup-founder-mode-ceo-double-standard-2024-9">founders</a> must contact me through another investor or entrepreneur I know. I'm a well-networked guy; there are hundreds of people I'd happily accept an introduction from. It speeds up the process.I've learned not to invest after a first meeting. I need three touchpoints, such as meetings or emails, to sense whether my relationship with a founder is developing or if they're meeting their promises.I also leverage my network to do due diligence. If I know someone who knows the space better than me, I'll chat with them or ask them to meet potential investees for me.My standard ticket size is around £20,000 or £25,000, but I've invested up to about £100,000 in some businesses over multiple investments. It's stayed at that amount over the years partly out of habit, but also because I want to focus on the entrepreneur and business without getting distracted by trying to "game" the ticket size.The expertise you can offer as an investor is fairly general, such as insights about fundraising strategy or how boards should be structured. But I've also made specific contributions: I found a CTO for one business and have supported several others in securing their main investor. However, I usually make the most impact with companies when I am on their board, which I've done for about a dozen of my investments.<h2 id="57f967e5-d9df-4314-9651-aa8e115dd063">There are good and bad signs in a potential investment</h2>I love companies that have a "MacGuffin," a term Alfred Hitchcock used to describe the hook that draws viewers into a film. I want to see the hook that explains why a business will win in a competitive marketplace.If I'm meeting entrepreneurs, I'll point to a passerby and ask, "Those guys are setting up the same thing as you. Why are you going to win?"The good answers are "MacGuffins." They could already have a deal with the No. 1 player in that space or have patents on amazing technology.A bad signal for me is when I see families working together, like couples or siblings. To me, it means there are probably some non-rational factors at play, like family relationships, that make it hard for people to do what's best for the business.The <a target="_blank" class="" href="https://www.businessinsider.com/adam-neumann-launching-wework-rival-different-business-strategy-2024-10">business model</a> is most often what makes me pass. It's pattern-matching — when I've seen something like it before, and it didn't work, I won't invest. It's annoying for the poor entrepreneur, but I like to apply my experience and knowledge of business.<h2 id="0b415f81-ec62-4072-a532-084b345a9350">My advice is to invest in people you know</h2>Angel and <a target="_blank" class="" href="https://www.businessinsider.com/vcs-are-hedging-their-bets-backing-competing-llms-2024-10">venture investing</a> is a high-risk, high-reward activity. If you're not willing to lose everything you invest, it's not something you should be engaging in. You almost have to assume that investments are written off and the money's gone, and what comes back to you is a windfall.I've seen returns several times the value of what I've invested, which is a really fortunate position to be in, and I still have some significant investments that haven't returned any cash yet, though I think they will.I'd say the sort of people who do <a target="_blank" class="" href="https://www.businessinsider.com/how-to-become-an-angel-investor-in-tech-startups-2022-10">angel investing</a> because their accountant suggests doing it for tax breaks aren't going to do very well. I'd encourage people to think about where their edge is — where do they have some advantage over others as an investor? The obvious option is to back people you know because not everyone knows them.Successful <a target="_blank" class="" href="https://www.businessinsider.com/30-of-the-most-successful-early-stage-investors">angel investors</a> are people that founders see as providing more than just money. Regardless of the company's outcome, they have a positive impact on the businesses and entrepreneurs they invest in.Do you want to share your angel investing story? Email <a target="_blank" href="mailto:ccheong@businessinsider.com">ccheong@businessinsider.com</a>

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