How to Angel Invest: Where to Find Deals
By Vela Wood
After confirming your accredited investor status, the next step is to find promising companies. Serendipity is definitely a factor; however, you can approach finding deals in a systematic way.
Identify Local Angel Networks
Local angel networks are the safest and smartest way to accelerate your angel investing opportunities. By joining an angel network, deals come to you. These organizations often host meetings, pitch competitions, or list-servs where they source and evaluate deals. Not only will you have access to these companies, but the network grants you learning opportunities by allowing you to see how other individuals evaluate companies. By investing alongside others, you can identify trustworthy people to carry the load of conducting the due diligence process. In his book Angel Investing, David Rose says angel networks provide “pre-filtered deal flow and a lot of collegial hand holding.”
Rose writes that in addition to requiring investors to be accredited, membership fees for joining angel networks range from $500 – $5000 or require an annual management fee. Investors in angel networks typically invest in “one or two companies each year putting $25,000 to $100,000 in each.”
Peruse Your Personal Network
Everyone has a friend (or a friend of a friend) who has started a business or is trying to. By engaging the people in your network about their pursuits and your interest in getting involved, you open yourself to the possibility of learning about their endeavors or asking for a warm introduction to a founder.
From our experience, if you show up to networking events wearing a blazer (or a fleece vest), startup founders will practically flock to you assuming you have money. Finding out about these events is not difficult. A quick search for “startup” or “tech” on Eventbrite will reveal free events in your area. Also, there are plenty of tech/startup groups in every major city that host events, so join their email lists to receive notifications. Organizations frequently hosting events in Texas include: Team Austin, Capital Factory, and Notley Ventures. By attending these events, you will start to see familiar faces and begin to gain a pulse on the startup activity and opportunities in your city. In addition, attending larger conferences like SXSW or Afrotech are a convenient way to meet founders and fund managers from around the country.
Special thanks to Vela Wood law clerk, Ikenna Okoro, for his assistance with this series.