Full Time Vs Part Time Angel Investors
At dinner last night with some other angel investors, I had the opportunity to give some thought to the time one puts into being an active angel investor. Many of the folks I met are or were at one point full time angel investors. In contrast though, I would have to classify my own involvement as being in the part time category.
It is not for want that I am only a part-time investor. Because a large percentage of my time is devoted to my trading business, I only have a very narrow sliver of time to dedicate to investing. Like many things in life however such as sports or music or entrepreneurship, if you are not wholly focused and committed, it is hard to find lasting success.
The successful investor comes with a few important tools. First is the ability to see a lot of startups, which investors refer to as deal flow. The second is deep pockets in order to build enough a broad enough portfolio and have the wherewithal to stay in the game. The third is a network of other investors, both angels and institutional firms, in order to build credibility and protect investments. Fourth, you need something to offer other than money to inform investment decisions and to add value to the startup teams. Lastly, you need to have an iron stomach to deal with the flops, recover from the ones that got away, to take a flyer every once in a while on the non-obvious idea, and to say no to the deals that are hot and heavy.
The full time investor that is successful is in possession with all of these tools. Even with all of these in the toolkit, there is no sure thing and success is never guaranteed. For the part time investor however, with only a few of these tools in hand, enter the game at a significantly disadvantage. They may have some success, but it would be pure luck and no better than buying a scratch off lottery ticket.
The main problem comes down to time. The part-time investor does not have enough time to build enough deal flow. The part-time investor does not have the time to attend events or setup meetings to build that investor network. Staying in the game with your current portfolio gets harder because you need to spend time with the startup teams, follow what is going on across their markets, and get a sense of the trends. At the same time, many of these founders need advice and connections and the occasion hand holding to get them through the rough times. All of these activities require time that the part-time investor simply does not have.
If you are a part time startup investor, I highly suggest you move to being full time. I realize that I myself need to change up my game if I am going to stay committed to startup investing. That means that I might move to being a full time angel investor, setting up my own seed stage fund taking on some LP’s, or getting more involved in an angel group to be more of a filter for quality deal flow and to have an instant network. All have pluses and minuses, but any option is significantly better than being a part-timer. I still love startups however and will continue to be involved in the NYC tech community regardless of the path I choose going forward.
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