Angel Investing 101
Angel investors are a key component in any startup ecosystem. They are the people on the front lines looking for the next great idea and helping talented entrepreneurs build great companies. An angel investor is more than just a check book – they are mentors, advisors and coaches. They are the people entrepreneurs turn to during, as Wendy Lea calls it, the dark nights of the soul.
In Cincinnati, we have a healthy community of angels thanks to organizations like Queen City Angels and the Greater Cincinnati Venture Association. But we need more. More people willing to give their time, expertise and advice to nascent startup founders.
The Greater Cincinnati Foundation in conjunction with Cintrifuse, held the first ever Angel Investing 101. Mo Wheeler, Frank Wood, David Willbrand and Austin Allison sat down to give Cincinnati’s philanthropists a quick overview of what it means to be an angel . Mo and Frank both talked about their experiences as Angels, David talked about some legal aspects of angel investing and Austin talked about how angels helped him build, and eventually sell, DotLoop.
Here are some of the evenings take away’s in case you missed the event and are interested in becoming an angel.
There’s More Than One Way to Be an Angel
The options run the gamut from individual angels making investments to syndicates of angels that invest along side of one another. Some angels actively help entrepreneurs run their business others take a more laissez-faire approach. It really is a matter of personal style.
But before you start giving entrepreneurs money, you need to understand the landscape. As David said, the best way to learn the ropes is from other people. So if you want to be an angel, find other angels and pick their brain. You also can get involved in the startup community without cutting checks.
Entrepreneurs always need mentors, advisors and subject matter experts. And it just so happens that Cintrifuse runs programs that connect entrepreneurs to mentors, advisors and SMEs. So if you’re interested in being an angel but don’t know where to begin, becoming a part of our mentor/advisor network is a good way to start.
It’s About More Than Monetary Returns
Making money is always good – for instance, for every $100,000 invested in DotLoop over $1 million was returned to angels. Which is nice. But investing in early-stage businesses is risky and not every company you invest in will be a DotLoop. So if it’s not about returns what is it about? Community.
Cities are built by successful entrepreneurs. Whether it is Carl Lindner Jr. or Andrew Carnegie, a common bond most great philanthropists and community minded individuals share is entrepreneurship. And the cities that fostered their entrepreneurship became the heirs to some of the nation’s most prized cultural, educational and business assets.
So while financial returns are a nice upside of angel investing – the real value is supporting the talented people who are going to shape Cincinnati’s future and ensure it remains a vibrant city.
You Don’t Need To Understand Tech To Be an Angel
It certainly helps if you understand something about technology but it’s not a requirement. As Frank explained, you just need to understand people. What many young entrepreneurs don’t understand and desperately need is expertise in business and sales. In the early stages of a company, tech founders have a lot of gaps that need filled.
A lot of times entrepreneurs don’t know what they don’t know and angels can help by filling those knowledge gaps. The real value an angel brings to an aspiring founder is an extensive network, an understanding of business and an expertise that can only be had after years of being a successful business person.
If you’re in a position to be an angel investor, chances are that you have already been successful in business. So while you may not understand the nuts and bolts of the technology, you do understand business. For a new entrepreneur, that expertise can be more valuable than funding.
Being an angel means interacting with young, smart talented people. It means helping founders create something from nothing. It’s about new ideas and figuring out how to solve problems. Really, what could be more fun than that?
Cincinnati’s Startup Ecosystem Needs Angels
Not because our startups need money (which they do) but because our ecosystem needs to tap into the immense wealth of business knowledge that only successful business people have. We need more people who have been there before and have far-reaching networks. We need people willing to spend time with founders trying to build the next great business right here in Cincinnati. And there’s plenty of ways to get involved without spending money.
So if your interesting in seeing what this whole #StartupCincy business is about consider becoming an advisor or coming out to one of our events.