Angel Investing — What to Remember

Early stage investing is as much about what to remember as it is what to do.

A long time ago, someone did me wrong. As I was discussing my options for revenge among my contemporaries, an older guy shared the most important thing to remember; “Don’t go to jail.”

The book “Into Thin Air” illustrates how the most important thing to remember when you’re climbing Mt. Everest is to get back home safely.

On my first center ref assignment for a local U9 girls’ soccer match, with the sidelines full of anxious, opinionated parents I caught a small panic attack as the girls warmed up. Despite two full days of training, the rules were starting to blur — direct kick on penalty or indirect. Yellow card on foul or straight to red? Five minutes before blowing the starting whistle, I casually asked Jordan, the seasoned, 16 year old line judge “What’s the most important thing to remember if I forget everything else?”

He looked me dead in the eye and calmly, almost reverently replied, “Mr. Wilkins, you’re the center ref, whatever call you make is the right one.”

“What to remember” is often more important than strategy, tactics, what people will think, models you create or the fame, money and reputation you desire.

In 30 years of angel investing, I’ve learned a lot about investment policy, objectives, guidelines, constraints, micro-tests, deal structures, difficult conversations with founders and investors, tax strategies, asset allocation, when to double down and when to cut the cord.

All that won’t fit into a reasonably sized post.

What’s important to remember will fit into a digestible post so here’s my version of it…in order of importance.

1. You cannot win if you don’t play. In the same way that learning how to swim requires getting wet, learning how to invest requires writing a check. You can’t research your way to success.
2. Don’t invest any money that you can’t afford to lose…entirely. You may lose many times before you get lucky, get good enough or get the type of break that makes this worthwhile.
3. Invest to the sleeping point. If you can’t sleep thinking about who, what, why, when or how you’re going to invest, don’t do it.
4. Better to be invested in a bad business with good people than in a great business with bad people…however you define good and bad.
5. Money that goes into angel investing is either tuition or triumph. Don’t fail to learn from your mistakes or forget to enjoy your successes.
6. Returns show up 5–10 years after you invest. Don’t ask your founder anything other than “What can I do to help?” before then.
7. Great investors coach, connect and support their founders. Good ones sit tight. Bad ones badger.
8. Success is measured by the money that goes into your bank account, not press releases or funding rounds.
9. Avoid people who crap on what you’re doing with your money. Find and connect with folks who get it. The squad you surround yourself with will be an important part of your success.
10. Diversify your portfolio. On crowdfunding platforms like Wefunder, anyone can invest $100 in a startup company. Start by putting a little money into a broad variety of founders, industries, products and businesses. Eventually, you’ll develop your own taste for the ones in which you want to become proficient. NFTs, MedTech or Hair and Beauty, for instance.
11. Don’t forget to enjoy getting better at this. Keep track of your progress over, at least, 10 years. It took me 20 before I would even murmur that I knew what I was doing.

There are no sustainable shortcuts. I think it is true that the harder you work your process, the luckier you get so savor the journey, work your process and, of course, don’t go to jail.

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