The Essential Qualities of an Ideal Angel Investor
As a tech founder with a nontraditional background, I’ve navigated the ups and downs of entrepreneurship, constantly learning and growing along the way. One crucial aspect of the startup journey is finding the right angel investor. Based on my experience from raising pre-seed/angel funding, I’d like to share some insights on the qualities to look for in an angel investor that could make all the difference for your startup.
Industry expertise
An angel investor with a deep understanding of your industry can provide invaluable advice and guidance. Their experience and insights can help you avoid common pitfalls and make well-informed decisions. When seeking an angel investor, prioritize those who have successfully navigated the challenges of your specific industry. Whether running restaurants or working at top industry companies, having the right experience is crucial.
Shared values and vision
It’s essential to partner with an investor who shares your values and vision for the company. This alignment fosters a strong working relationship and ensures that both parties are working towards the same goals. Misaligned values can create friction and hinder your startup’s progress, so take the time to ensure that your investor is on the same page as you. Grab dinner or coffee with them, and get to know them. They will be a partner in your startup. Make sure you hold shared values. My first angel check was after coffee with Erik Moore (now Base Ventures) in Oakland, CA. It was our second meeting. We talked at a cafe on Telegraph Ave for nearly 2 hours and shared life stories, what’s driving us, and who we are as humans. Erik is still a great friend to this day.
A robust network
A well-connected angel investor can open doors for your startup that would otherwise remain closed. They can provide introductions to potential customers, partners, and even other investors. When evaluating angel investors, consider their connections within your industry and their ability to leverage those connections for your benefit. I was lucky enough to be one of Rx Redefined’s first investment checks when they were just getting started. Their unique business model was like nothing I’d seen before, but I leaned on CEO Brandon Boots, who had quite a bit of healthcare industry expertise, and CTO Erik Smith, whom I have been good friends with since college at Oklahoma Wesleyan.
As they continued to show progress, I grabbed lunch with Roger Chen of Silverton Ventures in Austin, TX. As we were eating, he asked me if I was invested in any new and interesting companies. I shared Rx Redefined and sent him a follow up email with my thoughts. Roger and Silverton led their Seed round, and recently they just participated in Rx Redefined’s Series A!
So, look through the prospective angel’s LinkedIn and AngelList accounts, see who they have invested with before, and ask them what type of intros they have made for their founders in the past.
Mentorship and support
A great angel investor is more than just a source of funding. They should also act as a mentor, providing guidance, feedback, and encouragement as you navigate the challenges of building your business. The life of a CEO is sometimes a lonely one. Having a trusted partner in your corner who has been there and done it before is so helpful. When I sold my company Appstores to InMobi in 2012, Matt Ocko, one of my angel investors, received my frantic investor update email asking for negotiation help and picked up the phone at 3am PST as we were negotiating terms in Bangalore, India. Look for investors who are willing to invest their time and expertise in your success, not just their money.
A history of successful investments
While past success is not a guarantee of future results, an angel investor with a track record of successful investments is more likely to have the knowledge and experience to help your startup succeed. Do your research on the investor’s previous investments and outcomes to determine whether they have the skills and expertise to contribute to your startup’s growth.
Patience and a long-term perspective
Startups often take time to grow and achieve their full potential. Therefore, it’s important to find an investor who is patient and has a long-term perspective. They should understand that setbacks are a part of the journey and be willing to stick with you through the ups and downs of entrepreneurship.
Flexibility and adaptability
The road to success in the startup world is rarely a straight line. An ideal angel investor should be adaptable and open to pivoting when necessary. They should be able to embrace change and support you in making tough decisions, even when it means altering the original plan. When Nalin Mittal and I were in i/o ventures in San Francisco, launching our first startup, we had to make a tough decision mid-cohort and pivot our entire business model. Paul & Dan Bragiel (Bragiel Brothers) were not just supportive, but they encouraged us to find the right path forward. We hunkered down in the i/o venture’s sole conference room for a few weeks and emerged with a new path. If it weren’t for Paul & Dan’s flexibility and trust in us, we would have never made the pivot and eventually gotten acquired.
Open communication
Transparent and open communication is the foundation of a strong working relationship with your angel investor. Make sure your investor is approachable and open to discussing both the successes and challenges your startup faces. Seek out investors who value open dialogue, listen to your concerns, and provide honest feedback. This two-way communication will not only help to build trust but also enable you to make better decisions and overcome obstacles together.
Respect for the founder’s autonomy
While it’s crucial to have an angel investor who can provide valuable guidance and support, they should also respect your autonomy as a founder. The ideal investor should trust your judgment and allow you the freedom to make crucial decisions for your business. Look for investors who strike the right balance between involvement and giving you the space to lead your startup.
Passion for your mission
Lastly, the best angel investors are genuinely passionate about your startup’s mission and are invested in your success. Their enthusiasm can be contagious, energizing your team and helping you stay motivated during challenging times. Find investors who believe in your mission and are committed to supporting you throughout your startup journey.
In conclusion, finding the right angel investor is a vital step in ensuring your startup’s success. By considering factors such as industry expertise, shared vision, a strong network, mentorship, patient capital, reasonable expectations, a track record of success, open communication, respect for founder autonomy, and passion for your mission, you can significantly increase your chances of finding the perfect investor to help your startup thrive. As a tech founder and entrepreneur who took a nontraditional path, I can attest to the importance of these qualities in an angel investor and the positive impact they can have on your startup’s journey.
