I had a phone call yesterday with a very smart and savvy former Angel investor. He told me he stopped angel investing because he lost most of his money and finally realized that angel investing is risky, complicated and a lot of work! This is not the first time I’ve heard this and it made me wonder: Am I just a young, starry-eyed investor who is going to regret angel investing later? Sometimes I wonder…Why the heck am I doing this?
After a lot of thought, I have come up with five reasons why I’m angel investing:
- To make money. Contrary to popular belief, most angel investors do actually make money. In fact, they earn an average 2.5x return. I don’t know about you, but this is far better than my average in the public markets.
- To get an education. Since becoming an angel investor, I have learned more about business, economics, policy, culture and the human dichotomy, than I ever learned in college (or as an entrepreneur). I learn something new every day and am exposed to all sorts of things like optical sensors that detect sniper fire or my favorite – a technology that preserves bull semen. Who knew?
- To see the impact I make. There are perhaps far more efficient ways to make a difference than angel investing, but when you give money to a charity or invest in the public markets, it’s hard to see the results of your contribution. With angel investing, every cent you give, piece of advice you offer or introduction you make, can have direct impact on the organization.
- Passion. As an angel investor, I’ve had the great fortune to work with entrepreneurs who are so passionate about their business that they will stop at nothing to make it happen. It’s a rare opportunity to be part of something that defies all odds, offers inspiration on a daily basis and offers the chance to be completely unreasonable.
- To work with the best and brightest. Not only do you have the opportunity to work with entrepreneurs, but you also have the opportunity to work with investors. In my short time angel investing, I’ve had the opportunity to work with the heiress to the Hyatt fortune, a producer at NBC, the head of GoogleX, the World’s leading measles expert and hundreds more successful entrepreneurs, high ranking executives and smart and passionate people.
- To have fun. It’s always funny to me when high net worth people won’t angel invest because it’s too risky, but won’t think twice about spending $2600 a night at the Ritz Carlton. Everyone has their own definition of fun, but for me, I’ve had far more fun angel investing than I’ve ever had at the Ritz Carlton (and I’m writing this from the pool at the Ritz Carlton in Naples right now, so I’m not just saying that).
So…what’s my conclusion? Frankly, I think I’d be an angel investor even if I just lost money, but I am very motivated to prove it’s possible to make money doing this. I learned a long time ago when you find your passion, money follows. I have certainly found my passion, so I’m confident the money will follow.
What do you think? Why do you angel invest? Or why don’t you? Leave a comment.