Joining an Angel Group

Investing

2 min read You may find yourself contemplating joining an angel investment group. As with all investment decisions, there are both benefits and drawbacks to joining an investment group. Familiarize yourself with both before making the final decision.

Benefits

The angel network can build resources to share with the angel such as due diligence. This is time-intensive work, so it helps to share the load. Angel networks provide more and better deal flow than individual investors can find. The bigger the angel network, the more likely there will be investors that are knowledgeable about the market segments and startup business models. This lets the angel investor pursue deals outside their core expertise.

Angel groups can write bigger checks than individual angels and thus command better terms with the startup. Experienced angel investors can share their knowledge with new angels. This is particularly helpful in setting valuations, defining term sheets, and supporting the company. Angel investors can find diversification through the angel network and its deal flow. An angel network will have more influence over its startup scene than an individual investor. 

Challenges

Here are some challenges related to angel investment groups to consider:

  • Angel investing requires hands-on work with the startups, not only in funding but also in supporting them after the investment. They are often left filling in the gaps left by the local incubators and accelerator programs in coaching them into a place where they can raise funding.
  • First-time angels can find it time-consuming and expensive to learn the process. Newmarket segments require the angel investor to continually learn new industries and business models. 
  • There’s no collateral for the investment and it can all go to zero as it’s a risky investment class. One out of ten investments will be a home run. Two or three will provide a small return on investment. And the rest will fail. 

Angel investing can be a rewarding endeavor but it’s not without its challenges.

Read more on the TEN Capital eGuide: Leading an Angel Group


Hall T. Martin is the founder and CEO of the TEN Capital Network. TEN Capital has been connecting startups with investors for over ten years. You can connect with Hall about fundraising, business growth, and emerging technologies via LinkedIn or email: hallmartin@tencapital.group

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