Author: Abu Cassim
5 October 2018
“You can’t cross the sea merely by standing and staring at the water” – Rabindranath Tagore. You have to get wet at some point. So start by dipping your feet in to test the water.
An angel investor’s first deal can be a pretty foreign experience. Many elements are negotiable and, for most, you tend to learn on the job. Yet, we love “angel hacks.” In this blog we explore a few actions any new angel should do before taking the plunge and making that first investment. Joining a network of like-minded people will go a long way to helping you assimilate in to the startup space, but there are workarounds that will help you find your feet should you wish to go alone.
You have to immerse yourself in a culture to understand it. Just as different communities have different cultures, every startup space has a culture that an angel investor needs to understand to make informed investment decisions. One of the best ways to learn and effectively assess investment potential, is through active participation in the startup ecosystem. Spend time at innovation hubs in Jo’burg. Attend events. Meet with those that manage the different spaces and understand which innovation hubs excel where.
Immersion in these spaces will keep you up to date on new startup trends and identify emerging top startups. Most importantly, it will help you to get a sense of your sweet spot. You’ve got to know Port from Starboard before you set sail. Pitch sessions are a great experience, you’ll soon understand the good from the bad and know how to dissect solutions in a Q&A forum.
Another great source of knowledge is an experienced angel who’s got the t-shirt. Learning from his or her mistakes will help you avoid your own. In an angel investor network, this often takes the form of a mentor-mentee relationship. Casual discussions between angels often lead to hidden treasures. After years of experience, mentors often take their knowledge for granted. In minutes they can share trade secrets that took them years to learn.
Do not invest in the first startup that sparks your interest. Play the field, most (if not all) startups are doing interesting things. Most (if not all) founders are passionate about what they’re doing. The passion creates blind spots for both entrepreneurs and, subsequently, for investors looking to fund them. The more passionate the entrepreneur and the cooler the tech, the bigger the blind spot. Even experienced angels bounce investment opportunities off one another to get objective feedback.
Like an employee looking for a new job, there’s value in getting a few interviews under your belt. The interview (or due diligence) experience helps with subsequent interviews. You’ll know what to ask and what to look out for. Your objectivity improves with each additional interview.
Find your bearings and set a course before setting sail across the seas. Assess your progress against your investment thesis (see previous blog) on a regular basis and understand why there are variances, if any. In the angel space we work like captains and play like pirates.