How to Get Started in Angel Investing

I’ve had many brushes with private investment over the course of my career, but my journey and progression as an angel investor has been gradual and in steps. I have experience advising on M&A transactions, private equity, and lending to entrepreneurial investors, but when it came to investing my own money and managing an angel fund, I built up new expertise on the existing foundation I had in the finance and investment industry.

1/ Consultant to startups

I offered services to startups that were of value to them. This gave me an opportunity to work with entrepreneurs and their new ventures, gain more understanding about the challenges they faced, without taking significant risk. You could think of this as a low-risk investment of time and expertise, with an immediate financial return. This was useful for understanding the lay of the land in venture (impact ventures, to be precise), but to be clear, these were client/services decisions, not investment decisions.

2/ Consulting advisor

I began to flex my risk-taking muscles by advising entrepreneurs and early-stage companies. I charged a discounted rate for my time and took upside in the form of shares or deferred payment. I had to start thinking like an investor in these situations, to decide whether equity or deferred payment was a good idea. I learned I wasn’t a fan of the muddled client/investment decision and personally, I don’t like to mix the two anymore.

3/ Advisor

I made an investment decision to advise a founding team for equity shares, with a vesting period that coinciding with my advisory term.

4/ Accelerator co-founder

Co-founding a venture accelerator and founding an angel fund happened simultaneously. The accelerator, in its early days, was a platform where I and my co-founder could advise ventures in exchange for equity, at scale. It proved to be a tough model, my co-founder has since pivoted and I’m no longer active in the day-to-day operation of the company.

5/ Angel fund developer and manager

I found a niche in the market and seeded the formation of Pique Fund, investing in early-stage, triple bottom line ventures. It was a way for me to organize and grow capital around my initial investment in the fund. The fund has grown and I have so far made four seed-stage investments through the fund.

In the process of building a fund, I essentially started a business and finally embraced and understood what it means to be an entrepreneur. Many people approach angel investing having found success as an entrepreneur and through angel investing they hone their investing skills. I did it the other way around – I had the finance and investing skills and evolved as an entrepreneur in the investment industry.

In parallel with launching this angel fund, I developed a robust due diligence process and evaluation toolkit that I apply to all early-stage venture investment opportunities (this forms part of my book, Integrated Investing).

6/ Angel investor

I made an investment in another angel fund, led by a woman who I admire and whose advise I often sought when I was starting Pique Fund. I also recently made my first direct angel investment. I essentially applied the same due diligence process as I do for Pique Fund and invested in a founder that I had had the chance to get to know over the course of three years, including a period of time when I advised the CEO and her team.

Some people leap right into cheque-writing when they get started as an angel investor. I love gathering information, getting a sense of the lay of the land, and testing approaches before leaping in. This approach is prevalent throughout everything I do – it’s my due diligence and decision-making processes through and through. Angel investing is very high-risk. This gradual approach I took enabled me to hone my skills at evaluating people, situations, return, risk, and impact. I strive to have a strong awareness about what is driving my investment decisions and endeavour to be excited, slightly nervous (it means I’m aware of the risk), and confident when I write an investment cheque.

This post was first published on Quora on May9. Have a question about angel investing? Leave a question in the comments below.