Why Paying for Angel Due Diligence Was the Best Thing I Ever Did

After spending a year and a half trying to handle my angel investing on my own, I was feeling completely over-taxed and burned out. I finally broke down and decided to do two things: 1) empower a more experienced angel to make some investments for me by investing in his fund and 2) bring in someone on a part time basis  to help me with due diligence and deal flow. They were the best moves I’ve ever made.

Now that I finally have time to reflect on this decision, I am not sure why I didn’t do this sooner. If I was starting a business, would I expect myself to run every function? No! Just like I coach my portfolio companies to do, I would focus on my strengths and recruit a rock star team of people to support my weaknesses.

So how can you avoid angel burn out and recruit a rock star team for investment success? Here are a few tips:

  1. Understand your strengths. I’m terrible with negotiation and have very limited technological and deal structure knowledge. That’s why I decided to invest in a fund called Tahoma Ventures (John Ives). He has deep technological knowledge in a high growth space that I know nothing about and he’s a deal structure guru.
  2. Use your strengths to help others so they’ll help you. To use the previous example, because I invested in John’s fund and try to help him in any way I can, he’s been a great mentor to me for the investments I make on my own.
  3. Understand what you enjoy. I used to really like first meetings with entrepreneurs, but after meeting with about 500 last year, I felt like I was losing the freshness and enthusiasm required to make good assessments. I hired a part-time deal flow manager to help me with the due diligence required and I am a whole new person.  As an added plus, she’s an attorney, so she brings another skill set and a different way of looking at things.  Angel investing is not the most efficient way to make money, so if you stop enjoying it, what’s the point?
  4. Join an angel group. I am a member of the Impact Angel Group, Boulder Angels, Rockies Venture Club and Unreasonable Angels and through this, I’ve met great co-investors with all different kinds of applicable expertise to compliment my weaknesses and assist our portfolio companies.
  5. Understand the limit of volunteer help. Although these angel groups are great, they are all networks of volunteers and sometimes volunteer help just doesn’t cut it. I’ve finally resigned to the fact that when there are things that absolutely need to be done in a timely fashion,  I need to pay for it.

What do you think? Have you successfully relied on volunteer angel investing support? Are there people you’ve hired or organizations you’ve joined to assist you with your angel investing? Leave a comment.

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