Thinking about making an early-stage investment but don’t know where to start? We asked a few of our investor mentors to weigh in with some advice to consider before taking that big first step.
1) Do Your Research
Not every investment opportunity will be a good fit. It is wise to invest in a company whose offering you can get excited about because it speaks to your interests.
Investor, advisor, and seasoned board director Brenda Irwin recommends, “Learn about it, attend special events on the topic, read articles from thought leaders, let people know of your areas of interest versus simply ‘I want to do angel investing’. You may find deals in that area, or get invited into deals just so you can get your feet wet – a network effect will happen.”
2) It’s OK To Start Small
Elizabeth Yin, a former founder who’s reviewed over 20,000 pitches as a General Partner at Hustle Fund, sees a lot of angel investors start getting in the game by investing $5K, $10k, or even a thousand dollars to ‘test the waters.’
By starting with small increments in many startups, you’re constantly learning, she says. “You get to meet with lots of companies, then you get a feedback loop that shows you whether or not your portfolio companies were good investments — and that helps you become a better investor.”
3) Earn Your Seat At The Table
The days are gone when the person with the checkbook has the power. Janet Bannister, who helped eBay transition from a collectibles to a mainstream marketplace and then launched Kijiji.ca and grew it to become one of the most visited sites in Canada, says that great entrepreneurs have the choice of whom to take money from and you have to earn the right to be in that investment.
How to earn the right to be in that investment? “It’s how you show up every day, how you add value, the trust you build,” she says. “It’s building a relationship where people want to work with you, and building a great reputation.”
4) Build Your Own Brand
It’s not just entrepreneurs and companies that need to brand themselves. Consider what your brand as an investor is going to be. What is your unique differentiator? How are you going to add value to the company you want to ‘get in with’ from the beginning?
“Build your value proposition so that you are known as the best angel investor in one particular area,” Janet suggests. “That area might be technical skills, or it might be relationships where you can open up doors — but think about your brand and make sure you deliver on it every day.”
5) Find A Mentor
Having a mentor/mentee relationship with an experienced investor who can guide you through potential early-stage pitfalls is invaluable. Consider joining an association or an organization, attending conferences and summits, or applying to a program that facilitates 1:1 mentor relationships with experienced investors as part of the program.