As you may have read in my recent post on angel investing, building a trusted angel investment referral network can both increase deal flow quality and decrease time spent on due diligence. But what does it take to build a successful referral network? Here are a few suggestions:
- BE HELPFUL – If I could give one piece of advice, this would be it. In the time I’ve spent angel investing, I have been amazed by the number of people in the Boulder startup community who have volunteered their time to make introductions and offer advice to help me become a more effective investor. Their kindness has made me want to return the favor and our ping pong game of mutual kindness helped me expand my personal network and has made the entire community stronger. Now that I am in a position that I receive more requests for help than I could possibly deliver, I prioritize those who have helped me and have a reputation for being helpful.
- Be transparent – I think a lot of people hide their angel investor cards because they either 1) worry that they don’t have enough money or expertise to be in the “angel investor clique” or 2) are nervous to let others know how much money and expertise they do have for fear of being taken advantage of. I certainly understand these concerns, but it’s much easier to refer opportunities when people reveal what they are looking for. As examples, I work with one investor who is new to angel investing and hasn’t yet invested a dime, but has put a ton of time into helping us sift through opportunities. I work with another investor who has no time, but has deep pockets for investing. Both are equally helpful and because they were upfront and told me where they were coming from, I know exactly what opportunities to send them and when.
- Out Yourself as an Angel Investor – I realize the idea of publicly announcing that you are an angel investor can be really uncomfortable for people, but from my experience, the good has far outweighed the bad. Yes, I get time consuming inquiries from inexperienced entrepreneurs looking for money and even some of my “friends” now treat me differently since they know I have some extra cash. But…….my best investment opportunity of the year came from speaking on a panel at Silicon Flatirons and I have been referred to some of the most fascinating people in the country because I have put myself out there. Oh, and for the “friends” who’ve treated me differently, I’ve either worked through the bump and now have a stronger friendship because of it, or I’ve figured out that they weren’t real friends anyway. Win, Win.
- Just pay some one to do it for you – Lastly, if you don’t have the time or the interest to build a referral network, you can empower someone to do it for you. I spend a ton of time building my angel referral network, but I love angel investing, so it’s more of a pleasure than a pain for me. If it’s not your thing, that’s totally cool. You can join a private equity fund (we can’t publicly mention any due to SEC regs, but contact us if you’d like to know more), join a broker/dealer network like Circle Up or fill out this survey to find opportunities from our network that might work for you.
What do you think? Any tips for building a successful network?
And please, if you’d like to learn more about how to plug into our network, contact us.