Why I angel invest
I’ve been asked this question many times over the past 8 years. As my portfolio has grown, so has my answer to this question. I’m sharing my thought process because perhaps it will nudge some of you to angel invest too!
I consider myself a furiously curious person, and angel investing is one of the most rewarding ways I’ve experienced to satisfy this curiosity.
I was the Founder & CEO of InboxDollars from 2000 to 2019. We were a two-sided marketplace business with consumers on one side (who earned cash rewards for taking surveys, shopping, etc.) and marketers on the other side (who paid us to engage with our consumers in a performance-based model, which we then shared with consumers).
Our Leadership Team started noticing something interesting around 2010: many of our customers were VC-backed startups. It made sense because a common playbook for consumer-facing startups was to build the product, prove PMF, raise capital from investors, and then deploy some/much/most of that capital in paid media to grow quickly. Often times this process repeated itself across many fundraise cycles and resulted in a small startup growing to Unicorn status in just a few years. The product we sold to marketers was access to engaged & motivated consumers, so this was a natural fit. We loved being a part of our customers’ success, and it naturally made us curious about additional business models we might pursue.
One of the business models we considered was investing capital from our corporate balance sheet in Seed/Series A stage companies who could benefit from our distribution product and pricing model. The idea was that we might benefit not only by having stronger relationships with those customers — likely resulting in incremental revenue — but also from potential increases in the value of our equity as well. In theory, the increased value of said equity might even become the primary value driver of our business.
Ultimately, we chose not to pursue this model as part of our corporate strategy. [Side note: I rarely play the “What If?” game when I reflect on my entrepreneurial journey, but this is one topic I still think about. I think this could be a great model for a company that has mass scale of consumer distribution and a long-term horizon (10+ years) for liquidity.] Even though we decided not to pursue this model at InboxDollars, I continued to think about it and eventually decided to start angel investing as a personal hobby in 2013.
My 2013 answer to “Why?”
When I started angel investing, I knew my objective was two-fold: I wanted to support the startup ecosystem in MN and I wanted to (eventually) have a good financial return on my investments. One without the other would not be success for me. I visualized something like this:
Around 6-12 months into this newfound hobby, something interesting happened: I started learning new things. A lot of new things. I learned something new with each pitch deck, each conversation with a Founder, each term sheet, each stock purchase agreement, each follow on financing, each exit event…
Of course I expected that by angel investing I would learn about angel investing. What I didn’t expect is just how much overlap there would be with my core job responsibilities. My angel investing hobby was making me a better Founder, CEO, and business leader. At first this happened by accident, but once I realized it was happening, I became more intentional about it and that accelerated the learnings even more.
The list of examples was both lengthy as well as impactful to my company. A select few: I learned about new business models; I was better at formulating strategy with our team and sharing it with employees & customers; I was better at hiring and onboarding new employees; I was better at positioning the company to investors/acquirers; and I was better prepared for and more effective in M&A discussions. [Side note: this may be a good topic for a longer post.]
My 2021 answer to “Why?”
I now consider the learnings I get from angel investing not just as some tangential benefit, but rather part of the core value proposition. I label this Professional Development and add to my Venn Diagram like this:
I believe curiosity is one of the most important attributes for an entrepreneur to be successful. I consider myself a furiously curious person, and angel investing is one of the most rewarding ways I’ve experienced to satisfy this curiosity.