By guest authors Irina Patterson and Candice Arnold
Corey: I think where you can get into some trouble is if you have too many of the ride-along types in the group, too many who are there more for the social aspect and don’t really have the time to put in. If you have too many of those without enough of the active, go-getter angels, then it’s easier for an angel group to become more of a social club than an actual investment group. There’s just always a balance that you’ve got to have.
A really important thing – something I’ve learned from RVI members – is to think creatively and to not necessarily follow the trends or, like a lot of groups, follow whatever’s the hot space or these guys have some credentials or look who’s on their board, they’ve got this fancy guy on their board . . . A lot times of people get stars in their eyes. Even professional, successful angel investors can get distracted by things that aren’t necessarily practical or important.
And I think I’ve learned from a lot of angels in our group who are serious about how to dig underneath the skin of a deal and find what’s really important; to really do homework on a management team and not just by talking to a few peers, but by talking to them and really getting to know them and trying to get a feel for their characters and to see if things line up; to really dig into the business plan.
It comes down to homework. It really comes down to being willing to put in the time to research things right.
There are people just following trends and making snap decisions, and that’s how you end up only making money on one or two out of ten deals like so many in the angel community do.
But if you are willing to do that homework . . . Glenn Hanson, the gentleman I discussed before, who’s making a brand for pet crematoriums, he’s a perfect example of just one tactic. He’s a super optimist, and he doesn’t let himself get scared off by certain things that other investors do. He won’t immediately get scared off by a valuation that seems a little bit high, like a lot of investors will. He won’t immediately get scared off by a management team that doesn’t have every piece.
He’s very optimistic, and it comes out of an approach of his own connections and his own abilities add something to the company that you can’t put a dollar sign on. And when he gets in, he rolls his sleeves up, he introduces people to each other, and he really is active. And he has this super optimistic outlook about it. That’s one way to succeed.
There are other people in the group who are polar opposites, who are very conservative and they really, really hone in on that valuation. They have certain limits that they won’t go over, and they look at it very analytically and mathematically, and that works for them, too.
So, I guess my point is that there’s no one particular methodology to succeed in the angel community. I think there are different methods and they work for different people in different spaces. But the common denominator is that those two different types both put in the time, they do the homework, they make the connections, they roll up their sleeves and take it seriously.