Thinking Like an Angel Investor

In Becoming an Angel Investor, I wrote, "I want to be an angel investor.  At least I want to know how an angel investor thinks." 

Okay, I'll practice.  Let me pretend I'm an angel investor.  

Let’s say I have $100,000 to invest.  I qualify as an accredited investo r– I have a net worth of $1 million or more, my annual income is $200K or more, or I meet other criteria to be an accredited investor. 

Following the advice of my mother, “Don’t invest anything you can’t afford to lose,” I can lose the whole $100,000 and not experience financial hardship.

Where could I invest my $100K?  I could get about 3% for 5-year CDs.  I might make 6% on real estate if I’m in it for the long haul, maybe 8% in stocks, again over the long haul, but in these days and times…

Gosh, can’t I get a better return than that?

“Angel investors expect a 500% return in year five.”

A 500% return in year 5?!  Now that’s R.O.I.  I’m in!

So, I give my money to a cool start-up to do what it needs to do, I get an equity stake in the company, and all the great things that happen to the company happen to me, too, because I’m now a shareholder.  Rich, rich, I’ll be rich!

Hey, wait, if bad things happen to the company, I want my money back, okay?

What?!  I don’t get my money back?  With a CD, I can get my money back.  Real estate, hey, people need a place to live.  If I don’t like what’s happening with stocks, I can cash out in a second.

You’re telling me that if I give this company my $100K and the company tanks, I don’t get a cent back?

According to the Wall Street Journal, "at least half of all angel investments lose money and 48% of investments with final outcomes result in a 100% loss."

This is risky business.

Yes, but 500% in year 5…

As an angel investor, I'll go stealth to the VT KnowledgeWorks Entrepreneurship Summit on April 7 and 8 in Blacksburg, Virginia.  I’ll sit in the crowd and watch those 15 presentations by companies who want my money.

Given the risk I’ll take if I invest, I don’t care how cool the idea is, how "green" it is, how earnest the entrepreneur is, how altruistic an investment in his or her company would be, or whether or not the PowerPoint includes a cute music video with everyone shaking hands.

I have one question and only one question:  “How are you going to make A LOT of money?”


I seem to be writing a series of posts on angel investing.  Here's what I've got so far, most recent first.

Angel Investor Comments on Becoming an Angel Investor

Talking About Money

Becoming an Angel Investor

An Entrepreneur in Every Garage


Handshake Media, Incorporated, the parent company of Handshake 2.0, is a VT KnowledgeWorks member company.  VT KnowledgeWorks is a client of Handshake Media.

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