A question that surfaces regularly when I address potential investors is, “Why should I join an angel network?” After all, accredited investors are high net worth, accomplished, confident individuals. After achieving success in their careers, why wouldn’t an angel investor set out on her or his own?
Well, unless you are Jim Goetz or Mary Meeker and have been ranked in the FORBES Midas list, you probably have trouble gaining access to good quality opportunities at the seed stage. Sure we all have a relative that has a great idea and needs a little capital to get going in a startup. What about those real high quality deals?
The Needle in the Haystack Challenge:
In order to cull through companies and opportunities, you will be spending a lot of time in coffee shops meeting lots of passionate entrepreneurs trying to sort fact from fiction and optimism from reality. Lets say you actually meet an entrepreneur with solid leadership skills and a great idea with huge market potential- like the next Twitter. Now what?
You roll up your sleeves and start looking more deeply into the company, really deep into the company, because you are investing your own money into this seemingly great company. A week into conversations about grabbing 1% of the market and the startup “owning it,” you realize you need to talk to someone who knows something about, let’s say, consumer behavior or network security or SaaS pricing. Now what? Well, you get my drift.
When you join a network of other investors, they will be in the trenches with you: screening, sorting, listening, and performing due diligence. Through processes rating the company and even arguing over the merits of the investment, collectively a group of angel investors are more likely to pinpoint concerns and opportunities that one investor may not have considered. And, if one angel investor is smart, the group as a whole can be pretty brilliant and thorough in their analysis.
,And what about the terms of your investment? You know, valuations, equity versus convertible notes, etc. Wouldn’t it be a good idea to join others who are aware of deal terms and conditions, valuations and have more negotiating power than an individual? I personally tried it on my own a few years back and was relieved to find the resources of a group like the Atlanta Technology Angels:
# Increased deal flow to top emerging companies across a broad range of industries
# Improved deal terms as a result of investing collectively
# High quality monthly meetings with excellent company and educational presentations
# Numerous angel investing resources available through membership in the Angel Capital Association and Angel Resource Institute
# Opportunities to contribute to the Atlanta-area early-stage ecosystem through active engagement in company selection, mentoring and due diligence
# Networking with a group of committed angel investors
Now rated third in the country as an angel network, ATA continues to build professional resources and capabilities far beyond what one individual can achieve. Members are smart folks that can go deep on almost any topic. I’ve always said: smart people are attracted to other smart people.