I started Angel Investing about 4 years ago.  I guessed it would be a good time to write up some thoughts on my experience so far. 4 years is about half way to get a meaningful return, so this post is not yet about returns in angel investing. Others have written volumes about that strategy.

I invest in two ways. 1) direct cash investment 2) Investing my time and expertise  with startup companies in return for equity via my company Carabiner.IO

I have invested in 15 companies so far. 3 have exited (sold/folded), 2-3 are on life support and rest are in various stages of growth.

My investments have predominantly been in B2B companies. Best performer so far has been a non software company 🙂

I don’t enter deals alone. I am a member of the AoA and TAGs, two leading Angel groups in Seattle. I have also invested in one deal in an AngelList syndicate. In my AngelList investment, I did the least amount of diligence 🙁

I spend at least 10-15 hours on due diligence. I see no definite correlation between number of due diligence hours and success. In some cases, the more due diligence I did,  the more I found it difficult to step out as I had mentally committed to the deal, despite some yellow flags.

Some takeaways:-

  1. If the CEO hesitates to let you talk to customers, get out. By customers, I include broadly folks that are using the product or have expressed serious intent to use the product via customer discovery.
  2. If the deal is moving too fast for YOUR comfort, don’t get sucked in. Most companies will need to raise money in the future and it’s likely a better deal is around the corner. This is also called “FOMO” (fear of missing out).
  3. Try to have a conversation with as many members of the company as possible. Most interaction is with the CEO and they are usually on their best behavior during fund raising 🙂 .  I ignored warning signs in a company with CEO/CTO interaction.
  4. Divide and conquer. In deals that I lead, I try to get folks that are interested be responsible for specific aspects of evaluation.
  5. Developing a template oriented approach to evaluation has helped.

While Angel Investing is certainly risky, I have enjoyed my experience of interacting with a diverse set of people while doing so.