Some angels rip $50k, $250k or more into a startup. I never do that. Here’s why…
I want to build a big portfolio of investments. Three years in, I have 29 companies and I’m headed to 100.
I also want to put aside half the cash I have earmarked for angel investments. That money is what’s called “reserves,” and I put it into the very best companies.
A smaller check might not be what a founder hoped for. But the help those angels provide can be worth a lot more than the money.
How It Works
What does that look like in practice?
I invested in a fantastic startup in the fall of 2022. I put $5,000 into their seed round, which is my typical first check.
A year later, they were growing revenue 4x year over year and had reached annual revenue well into the millions.
Yum yum! Time to break out that checkbook.
I put $25,000 into their Series A. And when I see the founder for coffee on Friday, I’ll have a chance to thank him personally for saving me space in the round!
Learning From a Top Angel
Writing small checks is a great way to get started as an angel. Take it from Tom Hulme, whose angel portfolio went 24x and is now a Managing Partner at Google Ventures. He broke it down on a wonderful recent episode of 20VC:
“If your goal is to get into angel investing, one of the things that no one ever says is the amount you invest is almost irrelevant.
If your job is to learn and demonstrate you add value, then just write small $5k checks. I see so many people that never start angel investing because they think they have to invest $200k at a time. It’s crazy.
If you believe you’ve got to learn, you want to start early with small checks and prove you’re valuable and then actually see if you’re any good at it.”
What’s In It for Founders?
Okay Francis, I get why writing a $5k check is good for you. But why should a founder even bother with that?
Time for some real talk: $5k, $25k, or even $50k is not going to move the needle at a company. If you want big bucks, go to the institutions.
If you want helpful and supportive people around you, find some great angels!
I was just chatting with a founder yesterday, and she told me that her angel investors have done way more for her than any of the VC’s on her cap table.
Why is that?
Some VC’s are incredible. But others are like employees at any other big company — they’re bored, checking Instagram, and waiting for 5 o’clock.
Angels pick the founders we love. We invest our own cash, and since we love the company, we enjoy supporting it!
How Angels Can Help
Here’s a concrete example of how an angel can help you.
I invested in the pre-seed of a great SaaS company last year. The founder is doing great, and she’s heading out to raise her seed round.
I sat down with her and went through the pitch and deck A to Z before any outside investors ever saw it. We worked on the deck and her delivery.
When we were finished, that pitch was a heck of a lot better than when it started. She sounded more confident and the deck was clear and specific.
A pitch like that raises more money. Maybe I only gave her $5k, but a better pitch might raise $500k or more.
Wrap-Up
Angels can be tempted to invest too much too fast. We fall in love with a founder and want to give them $250k and take this thing to the moon!
But success in investing requires discipline. That’s why I stick with small checks.
Once the wire is sent, I watch those investor updates closely and try to help with any of the asks I see.
It’s fun — it’s like solving a puzzle!
And in a decade or so, we’ll find out if I’m any good at this whole angel investing thing. 🙂
What do you think of small checks? Leave a comment and let us know!
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