Angel investing carries a particular cache. Entrepreneurs look to you to evaluate the worth of their ideas. Whether using a self-directed IRA or non-retirement funds, you decide whether or not to invest and how to do so. And when everything works out, you earn money and contribute to starting a business. Who wouldn't want to be an angel investor in this situation?
Consider the possible cash gains as the first benefit of angel investing. According to a study, the total return on the 1,100+ angel exits was roughly 27% gross internal rate of return or 2.6 times the money in 3.5 years. Good in comparison to other stock investment forms. Nevertheless, it's critical to comprehend the specifics. Over 52% of those exits resulted in a loss of part or all of the investment, while 7% contributed almost all of the gains. This means that to reduce risk and boost the likelihood of profitable returns, angel investors should begin with a plan to make several investments.
While profits are the standard by which all investments are judged, funding early-stage businesses offers various additional, elusive, and personal benefits. Some angels wish to foster community development. Others desire to promote their alma mater's alums or assist female business owners. Some individuals choose a vertical market niche. Others seek alternative investments that add value while avoiding market volatility to complement their retirement. Goals are essential since angel investment is a marathon rather than a sprint. Here are a few unique benefits:
Make new friends who have great ideas.
The best businesspeople are excellent communicators, articulating their technological or medical breakthroughs in terms that almost anybody can comprehend while simultaneously explaining their business strategies. Their enthusiasm is apparent; you can see how quickly their minds work. Several investors enjoy getting to know other investors through angel investing. Even though they frequently come from entirely different backgrounds, they have something in common that helps them bond and foster meaningful friendships that last a lifetime.
The causes you care about
Angel investors are free to invest their funds in the businesses most important to them since they choose which companies to invest in. This might include business sectors you have experience in, alums of your university, or organizations that help a group of people you care about, like women entrepreneurs.
You decide what to invest in
Adding to your self-directed IRA investments with angel investing can be wise if you have reached retirement age or are planning for your senior years. With angel investing, plan owners have the power to increase their retirement income and the freedom to participate in exciting enterprises.
Several people have tried to become successful angel investors, but only some have reached that level. Many people become angel investors to fund the company and achieve their objectives. David Wu is one person who has embarked on the process of becoming an angel investor. David joined Silicon Valley's oldest startup fundraising organization, the Band of Angels, in 2008 and started investing as an angel. After making more than 50 investments, he eventually attained the post of Internet Committee Chair on the group's transaction vetting committee.
David joined Maveron as a partner in 2012 to help with the search for new consumer technology investments, particularly those at the intersection of gaming, social media, and entertainment. Maveron makes investments exclusively in companies that serve customers. David served on the boards of WaveXR, Illumix, Booster, Modern Fertility (purchased by Ro), August Home (owned by Assa Abloy), inbox (acquired by BIC), and Eargo (NASDAQ: EAR) while overseeing Maveron's investments in each company.