After I sold my company a number of people offered great post-sale advice from their personal experiences. One piece of advice that has stuck with me is that new angel investors should ease into writing checks. A successful entrepreneur shared with me that he sold his company and within the next 12 months invested $3mm into startups as an angel investor, only to lose every penny of every investment — not a single one made it and returned money.
Here are a few reasons why it’s good for new angel investors to ease into writing checks:
- Angel investments, being extremely risky, are likely to fail, so it’s better to make a number of tiny investments when getting started, rather than a smaller number of larger investments
- Angel investing, like anything, takes time to get good at, and the process can’t be accelerated by writing a bunch of checks quickly
- Investment opportunities will always continue to present themselves, so there won’t be a shortage of deals or a need to do several at once
After selling a company there’s an urge to invest in what you know and put money to work in startups. Angel investing is great but ease into it over time.
What else? What other thoughts do you have about new angel investors writing checks?