Introducing My Angel Investing Journey

I’ve been working in, with, and around startups for years now. In the next couple of years, I now have a goal to learn more about the investment side of our industry by making a series of angel investments. In this post, I’ll outline my approach to angel investing, including my investment thesis, target sectors and stages, deal flow and evaluation process, and portfolio construction approach.

Angellist, Syndicates, and SPVs

First, the how. I’m using Angellist as my plaform for finding and managing deals. This of couse is a layer of disintermediation from direct investment, but I’m using it to learn more about the process and to get a feel for the market. In exchange for the simplicity, I’ll pay some fees, and miss out on some of the information pre and post investment that a direct investor might get.

Typically these deals are run by a syndicate lead, and organized as a Special Purpose Vehicle (SPV). The SPV is a legal entity that is created to hold the investment. The lead will typically have a large network of investors, and will be responsible for managing the investment and the portfolio company. They charge some fees, typically a setup fee and carry, sometimes a management fee.

My Investment Strategy

My goal here is to write 10-20 small checks into SPVs over the course of a few years, amounting to 1-2% of my total investment capital. Not a lot, but enough to learn and to get a feel for the process.

To hit this pace, I’ll need to make an investment every 1-2 months, but I’m not overly religious about pacing, and I’ll take my time to make sure I’m making the right investments.

The right investments here are ones that meet my criteria:

  • I can understand the business model and the market opportunity. I need to get it
  • Early early stage, ideally pre-seed or seed stage.
  • Convertibles or equity are ok, but the valuations or caps need to be sane. Pricing discipline matters.
  • Founders have an advantage: the thing they are great at is something that matters for the business as designed.

In terms of focus areas, I’m looking at buisnesses that have tailwinds from the major macro trends of our time:

  • What changes from Covid-19 are going to stick around and help this business?
  • What businesses do better in an accelerated climate change world?
  • What impacts will lower cost space payloads and militarization of space have?
  • What will win when AI/ML/data get 10x better?
  • Etc.

This includes things like: companies that benefit from the massive development in cold-chain from Covid-19, companies with creative approaches to the climate crisis, but real business models (what’s a climate cure that a climate skeptic would pay for?), companies that are building the next generation of space payloads, etc.

Looking Ahead

I’ll be writing a series of posts about my experiences and learnings from this journey. I’ll be sharing my thoughts on the deals I’m making, the lessons I’m learning, and the strategies I’m evolving.

I of course will not be able to share all the details of the deals I’m making, but I’ll do my best to share what I can within the constraints of the SPV structure and respect for the companies themselves. All of these will be wrritten after the fact and are of course not marketing a deal, soliciting any form of investment, offering advice of any kind, or intendded to be forward looking statements.

Note: This is the first post in a series about angel investing. Future posts will dive deeper into specific investments, lessons learned, and evolving strategies.