Investing is never a sure thing according to those who have succeeded. If you can’t find a sure thing, the next best bet is to learn from the best practices of successful investors. Here are tips from active angel investors who have enjoyed success with some of today’s leading technology companies:
Investors Rely on Networks
Networking has always been a critical part for investing, especially for angels taking on high risk wagers in startup companies that are unknown quantities. Alan Deutschman writes in Fortune Magazine <http://money.cnn.com/
Since investors live all over the world, online networks are becoming increasingly important for investors to network together. A group such as LinkedIn’s Deal Flow Network < http://www.linkedin.com/
Look for a Strong Team
While it may be hard to figure out whether the public will catch on to a new product, investors have found that it’s much easier to evaluate the quality of the team in a company. In fact, the leadership is the only known quantity in a startup.
Ron Conway, who is most famous for investing in Google, shares <http://mashable.com/2011/10/
Investors Stay Involved
Investors know that they can’t get a good sense for the direction of a startup without becoming involved in the startup and asking hard questions. While some prefer to spread their funds in small amounts among a large number of startups, those who want to know which companies are worth additional investments will often become involved as a consultant or advisor.
Chris Sacca, a former Google employee turned investor, places a high priority on remaining involved <http://mashable.com/2011/10/
Investors Look at Salaries
Launching a business often involves dips in revenue, and a startup will only survive if it can manage expenses during this fragile time. Salaries are one item on a company’s balance sheet that catches the attention of some investors.
Peter Thiel, an investor in Facebook and LinkedIn, suggests <http://mashable.com/2011/10/
Investors Seed Multiple Ventures
Risk and failure are inevitable aspects of investing in startup companies. While the rewards can be tremendous, there is no guarantee that an investor will see that money ever again. In light of this reality, many investors explore a wide range of opportunities rather than placing all of their capital on a few companies.
Bill Clark of MicroAngel Capital Partners suggests <http://mashable.com/2011/05/
Understand the Exit Strategy
Bill Clark suggests that investors should understand the possible scenarios that may unfold in the life of a company and how failure or success relate to your investment. For example, if the company is successful and is bought, make sure you have planned for that scenario. He writes <http://mashable.com/2011/05/
Investing in a startup will involve high stakes. Even experienced investors admit they sometimes miss opportunities or lose bets they’ve made. If you’re considering a venture that involves an unknown startup company, seasoned investors have many tips to share that can cut down the potential risks you’ll face.