Angel Investing with your Head (and Heart)
Angel Investing can be a very rewarding career for those who can mix business acumen with a mindset for charity and community.
If you are an Angel Investor - you trust in the process of curating ideas and the people driving their commercial realization. The means used by Angels to assess opportunities is fully baked in the quantitative and qualitative review of business model, risk analysis, funding requirements and leadership - a process carried out by the due diligence team. The opportunity is scored and the opinion of all members of the team is weighted in the decision to invest or pass.
An idea or business plan can have serious flaws or have insufficient upside. And while we should be always optimistic about the success of an idea or a team, we should never let wish-thinking take over our judgement. Emotions are welcome during the human interaction with the company but the decision should be brutally honest and faceless - as it needs to be. The communication of the findings of a failed review will help direct the company to reassess their idea and make the required changes ... or abandon the idea altogether.
Occasionally, however, things are more subjective when the opportunity cannot be adequately scored, by virtue of its novel concept or an entry into an uncertain market opportunity. It is at this point that the individual angel investor combines the results of the review with his own opinion and appetite for risk. Its a substantial grey area here: gut feel, past experience and a fuzzy sense of what may work combined with personal responsibility to put money to work. Emotion plays a part - and this will move the decision toward one that is less cold and calculating.
The fact that an investor may show a tinge of charity or empathy during the investment decision process makes one a true 'Angel'. You are demonstrating trust in the opportunity, the team and your opinion of it. Putting money in the hands of people with drive and energy usually means they can figure out ways through obstacles. Also, investing in the local community business means that, regardless of the outcome of the endeavor, you have helped support the growth of the area you are a part of.
Yes, do be an SOB during the due diligence process and ensure you are being pragmatic on the important parts of the business. But when you combine your experience and knowledge with a willingness to trust in your emotional side, then you have invited your heart in to the decision process ... and it can be a valuable ally.