We all know that angel investing produces better returns than the stock market.
A well-equipped angel portfolio has an average annual return of 25 to 30 percent. That’s 2 or 3 times better than your money would fare in the S&P 500.
The best part?
As an angel, your investments aren’t subject to the volatility of the Nasdaq or the New York Stock Exchange.
You won’t be left biting your nails each time tax reform or trade law comes up on the political agenda.
Investing in the stock market does have the benefit of being liquid – you can take your money back out of the system at any time, if you want to.
But in the stock market, you are powerless. You can buy, sell, and wait. That’s about it.
The same cannot be said for startup investing. In fact, as an angel investor, you have a tremendous amount of power.
The best angels use that power to steer startups towards success…
And, as a result, they make better and more consistent returns than angels who simply watch from the sidelines.
So, if you know that you can provide value to the companies you support financially… you absolutely should.
For example, my area of expertise is digital marketing. I’ve helped companies like Amazon, Microsoft, and Google grow using these skills.
So when I invest in a startup that’s struggling to gain market traction, do you think I just watch helplessly and hope they’ll figure it out?
Here’s the thing: just like you’re choosy with your investments, startup founders try to select investors who have more to offer than just money. (Click here to read more about becoming a commodity to founders.)
Lots of startup founders even look up to their angels.
And why shouldn’t they? If you’re investing in startups, you have probably already achieved some level of success in life.
That makes you particularly qualified to help “steer the ship,” so to speak.
Luckily, there are several ways you can contribute, beyond just providing cash.
For starters, you can sit on the board of directors or act as an advisor to the founders and chiefs.
Your unique perspective can help identify any weaknesses in the business that those too close to the project may be blind to.
Believe me – as a startup founder myself, I can tell you that there are unlimited opportunities to help founders make important decisions.
As an angel, you should give feedback and provide input any time you’re asked (within reason, of course).
Don’t be pushy about it – sometimes founders won’t heed your advice, and that’s okay. You aren’t here to run their company… just to help out when help is needed.
Sometimes that help comes in the form of wisdom.
Other times, the best way to add value is to facilitate connections between startup staffers and your own key contacts.
These connections can help bolster a startup in all stages of growth.
Maybe the business needs a new software developer, and you happen to know one.
Or maybe, down the line, your personal and professional contacts will help fill in a funding round.
Either way, the combined forces of all the equity holders’ contact lists can be immensely powerful – transforming a small operation into a galloping project with nearly global reach.
And you’ll be rewarded; by contributing your wealth, work, and wisdom, you are increasing the odds of a favorable exit.
That means more money in your bottom line. And, in most cases, founders will reward supportive angels by letting them in on future deals.
More wins… more satisfaction… more money.
That’s the power of investing more than just your cash.
Until next time,
21 responses to “This is Why YOU Are More Valuable Than Your Money”
April 25 2019