The Structure of Angel Investing Works Against All But A Select Few

This is perhaps the most valuable learning. The reality as an individual investor, and through Golden Seeds, I am not going to see the best companies or the winners if you will. (or to be even more specific, the companies that have access to the influential funders. Many companies fail not because they are not good companies or have the right leadership but because they run out of access to money.) That is because now, as opposed to maybe 10 years ago, there is a lot more interest in women led start-ups and angel groups/seed VC funds investing in women led startups that identify the best companies in silicon valley early, and have a lot of money to invest. And KEY is the connections to these entrepreneurs which individual investors such as me, and Golden Seeds at least here in silicon valley do not have.

My point here is maybe captured in this story Hottest Women Led Start Ups. These are not all great companies, I am not sure I would have invested in any of them really, but I would not have had the opportunity if you see where they did get funding.

That does not mean that entrepreneurs that I see are not going to be successful, I would not have invested if I thought that, but it does mean it will be harder for them to attract the follow on money or close rounds quickly unless they have access to the somewhat closed off world of influential big angel investors and later stage firms. That world is only open via connections or social networks. And so my value add as an angel investor is really to help the entrepreneurs get contacts within this world, which is really really hard to do. An exit or two would of course help. maybe.

Yes, there are other local angel groups that work together, and on occasion they can syndicate but they are not players in the true sense of the word. Most of these angel groups have yet to have a truly successful exit, which is why if you really want to make money in angel investing, it is better to join an angel list syndicate run by a highly successful angel with a track record of successful exits. You lose the “fun” of being part of an angel group which means a getting to see and evaluate pitches, and meet some great fellow investors. So I am not recommending against joining an angel group, just that as with most financial investments, diversity is key.  I invest as an individual, Golden Seeds member, LP in VC fund,  crowd funded real estate and through an angel syndicate.

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