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How to Become an Angel Investor: Tips for Investing in Startups

Via All Business : I’m an investor. I invest in startups and people with ideas. And I’m not alone. Investment in startups has exploded over the last few years, especially in the tech sector. Among investors there is a lot of demand to get in at the ground level and invest in new creative ideas. So it’s nowhere near as hard as some entrepreneurs think to find an investors looking to back the next big thing.

In my view, the more difficult task rests with those who want to invest. For angel investors, the ultimate value of an idea or business partner is notoriously hard to predict. So if you’re a first-time investor, there are a number of things you need to consider before you take the plunge.
Invest in people first.

The emergence of the tech sector has revolutionized the art of investing. It’s now a highly competitive and fast-growing market. The speed of change can make the product or company seem like the most valuable asset on offer.

But a brilliant idea alone is not the sensible way to value an investment. The people behind that idea are much more important. In my experience, it’s best to invest in people, their ambitions and ideas, and look at where their drive could take them, thus taking your investment to the same place.

In my experience as both a successful entrepreneur and investor, the major challenge is finding the right people to invest in. First-time investors need to look for like-minded partners–individuals who are not just looking to take the money and carry on, business as usual, but people with scope and vision, committed to goals and priorities that are similar to yours. It’s the people that count in investing.

Do you share the same dreams?

Before investing, you need to get to know the entrepreneurs. Talk to them about their interests and their views on life. Find out about their dreams and aspirations. Your real investment will be in these intangible assets.

Great ideas are more common these days than ever before. Thousands of startups and brilliant ideas emerge, but not every person has that unique ability to inspire you, the people around them, and the people who are going to buy that product.

Forget about the money.

And as a first-time investor, you need to ask yourself: what value can I add to this business, over and above the money? Speaking from experience, your investments will be a lot more successful if you can add something valuable to the business, over and above the cash. That might be connections, insight into the sector, or marketing expertise.

Speaking personally, I’ve always wanted to be part of the team I’m investing in–a shaper and a driver of the business. Money has never been my motivation. I want to be in a position to offer my knowledge of the various fields in which I have an expertise. No matter how disparate fields of business or interests might be, there is always a way to marry them for the benefit of both parties.

The numbers aren’t as important as you think.

Do not look for someone who just gives you a clean business plan and clean numbers. As surprising as this may seem, it’s really not that important for them to know everything about business; most startup founders don’t.

When you’re an investor your primary duty is to bring the knowledge and expertise you have accumulated over the years into the new business. Look for someone who is open to collaboration, someone who would consider you an integral part of the founding team, a person who understands the value of the ideas and experience you bring. The numbers will come later.

Create the right partnership.

In the early stages of an investment you learn a great deal about the people you’re working with. It’s important to commit time and effort to building relationships; the constant contact with them on a daily basis shapes the business and you begin making joint decisions for the benefit of the company. Being involved in this process from the start means that any success is much more satisfying than the actual financial reward, to me at least.

A final word for entrepreneurs.

If you’re an entrepreneur who is reading this, looking for insights into the psychology of the investor, here’s some advice: never look for someone who will just give you the money. Look for people who also share your ideas and interests; someone who shares the same passion for the concept, and can help you realise it. Ultimately, it is passion that drives a business, not money.

Look for people who won’t argue for a growth in revenue, but rather a growth in quality. Look for investors who take pride in being the best they can be, and have worked hard and truly earned the money they are investing in you. The advice and guidance of these individuals will prove more valuable than any injection of cash.

Look for a partner. Not an investor. Their experience is more valuable than their money.

About the Author

Post by: Mahdi Yahya

Mahdi Yahya is founder and Managing Director of SAMA Telecom, one of the largest carriers in the Middle East. He is also co-founder of Room One, a two-story, Central London creative co-working space for artists and entrepreneurs. As an investor, his most recent project is Mana, a mobile app studio, which has just launched ”Thoughts Around Me,” an anonymous conversation and messaging app.

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