Question of the week
I am considering developing a portfolio of angel investments? How much have you invested in total? What is the avg. size of your investments? What kind of IRR are you looking for?
First of all, I'd love to see more investors get into the angel investing market, particularly women. I am not going to share the dollar amount that I have invested in total but I am going to talk about my strategy.
I invest in people first, businesses second. I want to get in at the beginning when the valuations are low. Low meaning nothing over a $5m post valuation. So after the round is raised the company is not valued at more than $5m. I put in anywhere from $25-50K. I want to own 1% of the company from the get go. Even when there is a convertible note, I am assuming that the note will eventually convert because they will be able to raise a Series A. With that being said, although I am not a huge fan of the convertible note, I do it on occasion and it must have a cap so that when we do convert I am able to own my 1%.
Why that amount? The reason is that I expect the company will continue to grow and I want to put in my pro rata share at every round. If I put in $25-$50k from the onset then when there is a $10m round I can afford to keep my 1%. If it started with $100K, it would become too expensive for me to put money into that round. Also, this way I am consistent with my investments. You never know which one will hit it out of the ballpark. I can't make that choice at the beginning so I am consistent with the percentage amount on every investment.
What kind of IRR are you looking for? Certainly I believe that every company that I have invested in and have got behind will have some type of return. I am fully aware that the odds tell me it is not possible but I am a believer in everyone I have invested in. I am not a passive investor but really roll up my sleeves and help, listen, mentor and do anything I can to help the company grow. I care about each and every entrepreneur I back. I preface this up front because even if the IRR is at 2% and another one is at 10%, I am happy because that entrepreneur saw success. I am probably not the norm on this but it is more important to me to see each of these entrepreneur work seriously hard to execute on their dream.
I love being part of it.