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How do Angels decide what to fund?
Because Angel Investors are all individuals, it's hard to determine the exact type of company each person will decide to invest in. There are obviously a few boxes a startup must check in order to be considered, but wondering if there are certain things about a company that make them more attractive for an Angel investor?
because they are people who got burned many times before. Second point is they
are not billionaires with too much money to throw around.
Good news is there are not many ideas or projects that one can choose to invest
that will be 100% success. This is good news for start ups because angels
look for at least 60 to 70% probability of success record. Even they can't tell
which venture or idea will turned out to be successful. Basically even angel
investors are gambler but good odd gamblers. This is why they are successful
and why angel funding is a successful investing way to make money.
All about odds of say 6 failures with 2 to 3 success that turns out on top
of the losses from those 6 failures. That is what angels actually gamble for.
Any investment is a gamble somewhat. Success comes from early hard work
and coming up with the great idea and a good team to execute that venture.
This is what angels look for.
Angels cannot tell some ideas are bullet proof of success since such start ups
are probably in the very early stage or maybe it is just an idea on paper or maybe
a small prototype done. Remember Apple computer, the first investor was actually
the store electronic shop that buy 50 kits from Steve Jobs. He was actually Apple's first
angel investor. The second investor was that retired venture investor, forgot his name.
That invested his own money. When Apple grew, that guy knew people who can invest
more money into Apple. So having connections is also very important. This is why I
tell people make friends with anyone who is richer than you especially make friends
with anyone who works for venture firms or even banks even the doctor you see
for your pain. These high successful people do invests their money to build more
wealth so they kind of know other people who also invests. Sometimes all it takes
is one person connection that could grow into a larger network of connections.
It is very tough to do a cold call asking someone for investment money. Or even
pitch to angel or venture firms if you don't know them directly but if through someone
who knew the angel investor or venture investor than there are great chance for
further meet ups and discussions and even go front process of other start ups
since there are many start ups maybe way in front of the process.
Sometimes even the best ides are tossed to the back or just sitting under other
proposals. But if you have connection, your file will be on top for sure. If your
project looks interesting, they will probably fund your project. Remember, actually
no one will know some ideas are successful or not. Don't believe what people say
that angels and ventures can look at something and know right away it is the next
Ebay or Facebook. If they can tell means they can tell the future, Investing is all
about odds of good reasonable gambling.
I was in one of those angel pitching nights where start ups pitch to a panel. I can tell
you this. Most of the ideas are just so so kind of ideas. Nothing striking but a venture
is just a step toward something that seem small but big in future efforts and evolution
as a company grows. Sometimes even the founder have no idea how it evolves.
Example is Amazon where he was trying to sell books online. This way he saved money
from having a store front and paying for rents for the store front so he can offer lower
book pricing. This is just basic retailing idea and as you can see now how Amazon has changed
as it grew and evolved. So, any early angels or even venture firms could not tell from the start
how Amazon could be a great success. This is why venture firms sometimes missed to see
the big picture and missed out on opportunities.
This is the good news I have for any start ups. You could have a lousy idea but if you can
pitch to people your abilities and most likely they will invest in you and your ideas since they
know ideas iterate all the time becoming more focus and better for the market.
So, don't believe in the fact your ideas are not top notch on paper. You determine how to scale.
You determine how big you want to grow your business. All business came from hard work, smart
work, and just be honest toward your customers.
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