Back in 2001, while an undergraduate in college, I spent a good bit of time meeting with angel investors in an effort to raise money for my startup. Not knowing much, I wrote an extensive 30-page business plan outlining every aspect of the business (I even made the mistake of paying a lawyer, yes a lawyer, to give me feedback on the plan — ouch!). At one of the meetings, the angel investor offered up a line that has stayed with me ever since: most angel investors have deep pockets and short arms.
Of course, the joke is that even though angel investors are wealthy (deep pockets), investing is a hobby for them and they don’t write that many checks (short arms). Here are a few thoughts on angel investors with deep pockets and short arms:
- When pitching angels, ask how many tech startup investments they’ve made in the last 24 months (it’s good to know if someone is truly active as many angel investors aren’t actually active angel investors)
- Find out what size check they typically write as well as their areas of interest
- Ask how they typically add value, if at all, for startups they invest in
- Inquire as to their decision making process and what, if any, red flags they see with your potential deal
While most investors — angel, VC, and other — have a combination of profit-motive and fear of missing out, angels, more so than other groups, are driven by the desire to help entrepreneurs and to be a part of something interesting. Regardless, deep pockets and short arms still holds true today, just like it did almost 15 years ago.
What else? What are some more thoughts on the saying that angel investors have deep pockets and short arms?