Five ways to spot a great angel investor – “They’re your second brain not just cash machines”

Jasper Masemann 2012-04-20 0

Before founding greatcontent.com, Jasper Masemann worked as a scientist for Professor Malte Brettel at Aachen University and conducted his PhD study on what criteria make a great Angel Investor. He has also made a some angel investments of his own. Find out what he thinks makes a good business bedfellow…

Right here in Berlin, right now is a great time to get funding for your ideas, thanks to low interest rates and high expectations on Internet IPOs. So why spend time searching for the right investors if they are already calling on you?

Because it’s not all about the money. Try to keep focused and don’t jump into bed with the first angel to offer you money – you could be signing your life away to the wrong partner. Here are our top tips for spotting the perfect Angel Investor…

Science versus real life

At RWTH Aachen University we questioned more than hundred German Angel Investors about their past successes as well as their skills, reputation and contact network. Our survey mostly interviewed experienced angels with on average nine investments and nine years of experience. We conducted PhD statistics with this data, but for this article I also want to highlight the practical insights based on my real-life experiences. In short – scientific theory will get you so far, but you have to put that theory into practice to yield results…

Get angels with lots of friends

Of course, the experience of an angel is important for you. But, statistically, the contact network of that angel is three times more important. Makes sense, right? More contacts means more knowledge. As a startup you lack functional and market knowledge or sometimes simply just need a good lawyer, developer or SEO guy. Isn’t it much easier to ask the angel for a good tax accountant or an experienced founder than to spend needless time hunting what could be cold leads?

But find someone who cares – and will put in the hours

OK, so now that you have that well-connected guy, but now you find out the reason he’s so popular – because he spends time with everyone but you. In our sample, we found that the most successful angels not only spent a lot of time with their startups (32 hours as lead, nine as non-lead investors per month) but also got in contact with them several times per week instead of once a month. Why is this important? Because you are a startup and you are running fast. Be sure not to lose your angel on the track.

Have more than one – build an expert team

So one caring angel with a large network is great. But what about two…or even more? Statistics agree that not being monogamous to your angel is good policy. But beware – too many angels could you from doing your work (imagine a host of them demanding the hours highlighted above).

Find a complementary pool of angels, eg one that is more operationally active and one has the super-large contact network. Try to look for one lead angel and perhaps one or two other active ones. If necessary, get them to pool their shares to make decisions easier and faster. Don’t lose speed with too many “caring” angels.

 Let your angel shine on you – say “no” to Ashton

So why do you want Ashton Kutcher as an investor? OK, so there’s obviously ta cool PR effect for B2C, but statistically among all our investors it’s tiny. What’s much more important is the angel’s reputation when it comes to evaluations on follow-up investments or even exit multiples – at a later stage of your company. Well, nobody will disagree that Oliver Samwer will still get a higher multiple than most of us.

For related posts, check out:

Want to get acquired by Google? Google VP explains how to go big

Five ways to get Earlybird to fund your startup

Image credit: featured image – flickr user aloshbennett, chemistry – zhouxuan12345678, heart – flatworldsedge, Ashton Kutcher – david_shankbone

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