I believe angel investing has a core of passion that vibrates or ripples outward to others. That ripple is just enough to move an entrepreneur forward along a still stream, a dead calm, or a cold silence where one act of favor gives light and sound.
So how do I cast my rock into the pond? How do I make it skip across the water to multiple pockets of investments? In their book, Winning angels, the 7 fundamentals of early stage investing, Amis & Stevenson suggest four categories of sourcing activities that will help you create a strategy that will guide you on “how to invest your time in order to invest your capital.” (2001, pg. 34) These activities are preparation, networking, visibility and focus. (pg. 35) As a newbie, if I could start with one doable activity from each category, I can start my ripple effect.
The preparation activity of writing (and distributing) a one pager gets you on the map. When you can articulate your position, you are more likely to gain success in a particular area. This one pager “describes what you are interested in and what you are willing to consider.” (pg. 37) You are not writing a narrative here but instead giving your direct position on what you are willing to do, who you are willing to do it with and how you are willing to do it. Focused deals are the easy deals. This one pager brings start-up entrepreneurs to your pond.
The networking activity of personal meetings with bankers, lawyers, and venture capitalists is a great avenue since I spent 18 years in the financial industry. I can recall the times when bankers could not partner with new start-ups because of so many lacks-credit history with the bank or good credit, sustainable cash flow, assets, etc. Nerdwallet suggests six reasons why businesses are rejected for small business loans to include: bad or no credit; lack of collateral; weak cash flow; lack of preparation, seeking small loans (under $100,000); and risk averse bank. (Nykiel, 2015) This networking activity gives focus to a preparation activity by filling the gap for start-up funding under $100, 000. Even if that number is reduced, it will still fill a need. I liken it to the secondary lenders like where the interest is high but the deal can be done without with less stringent qualifiers. Networking gives you a steady stream of referrals.
Let’s get Visible, Visible by talking. Amis & Stevenson suggest giving an interview, speeches or writing a book. (pg. 43-47) Remember you don’t have to be the expert for everyone. You have to be the solution for your niche. This type of visibility also creates a ripple for you to gain more engagements which increase your networking circle. How many times have you thought or said “I could write a book on…” Your speaking engagements will be the retail spot for your book. People like to take the tangible home to review and duplicate the processes of success. The brain can’t absorb it all, but literature is a lifelong teacher and refresher.
And finally you will need focus activities and tactics. By narrowing your scope to one or two areas, you can better target your investing. It goes back to passion for me. I have a passion for the arts and I know I want to cause ripples in that industry. I believe the arts is the focus industry, but I can skip my rock amongst any of the artist expressions.
There is no perfect pond except for the one that you create for others. As an angel investor, sourcing puts your eye and heart on the group of entrepreneurs for you to have a life changing influence that makes their dream a reality.
Amis, D., & Stevenson, H. H. (2001). Winning angels: the seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.
Nykiel, T. (2015, May 13). 6 Reasons Businesses Are Rejected for Small Business Loans. Retrieved May 21, 2017, from https://www.nerdwallet.com/blog/small-business/6-reasons-businesses-rejected-small-business-loans/