Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups

As an investor, you put your money behind the entrepreneur and her company, not behind a specific product or service.

Market diligence covers your independent review of the claims that the company makes regarding the industry into which it is entering. You should verify the market size, competitive players in the market, and industry trends that might affect the company's planned products and/or services roadmap. You do this by conducting online research, talking

Because of the desire for information and updates on the world of early-stage investing, there is an equivalent need for speakers, judges and panelists on the topic. If you seek out the organizers of such events, you will find that they will likely welcome your participation and be grateful for it. The more you speak, the more you will become known

In the past, the closing typically involved sending paper back and forth for signatures and using overnight delivery services to send checks to the company's bank. Today there is a trend toward fully electronic/digital closings, in which the requisite documents are electronically signed by all parties and funds are wired directly into the company's

Angel investing is an area in which the so-called Law of Large Numbers applies. This is a theorem that describes the result of performing the same experiment many times. According to the law, the average of the results obtained from a large number of trials should be close to the expected value, and will tend to become closer as more trials are per

You can now see that how much money you make from your angel investing is determined by four simple numbers: The value of the company when you invest. The value of the company when you sell. The number of years between those two events, which, taken together, give you your rate of return. The rate of return, multiplied by the amount of money you in

Returning to the math lesson, let's assume that we as angels want to target a 20 percent annualized return from our investments into 10 companies, and we know that statistically only 1 out of those 10 is going to be our portfolio-maker home run. This means that every individual company in our portfolio needs to be at least theoretically able to ret

Once an investment is made, the rough outcomes (averaged from several independent studies of angel returns) are: 50 percent eventually fail completely. 20 percent eventually return the original investment. 20 percent return a profit of 2 to 3 times the investment. 9 percent return a profit of 10 times the investment. 1 percent return a profit of mo

When there are multiple investors in a round, the simple fact is that not everyone will check everything first hand, and everyone (officially or unofficially) relies on the deal lead to have done some hard work to validate that this is a great opportunity. While you may not be legally responsible for making good your followers' investments if the c