5 (Other) Reasons Why Angel Investors Invest

Sep 15, 2011

To understand angel investors and why angel investors invest, is to understand it’s more than just the money.  Yes, you always want to walk out with more money than what you came in with…but there are other reasons as well.

Did you know?  The earliest angel investors were spotted in the early twentieth century as investors in Broadway shows who were seeking a little bit of excitement in their lives, as well as a return.  They often swooped in by spotting early talent, and “rescued” the star of the show.  Hense the name angel investor.

We often tend to forget about the emotional rewards angel investors thrive off of.  So today, I’m posting 5 (other) Reasons why Angel Investors invest in you.  Enjoy 😉 .

1. Re-Engagement

This is usually where it’s at for retired angel investors.  Mike, a retired 14x CEO who’s raised over $600 million, says “You know how most people can be happy just lying on the beach?  Yeah…I can’t do that.”  14 companies as the CEO, his brain is wired that way.  Even though he’s “retired”, he can’t calm down even if he tried.  Getting to participate part-time in a company helps angel investors and retired CEO’s adjust to retired life.

Why not just start another company themselves?  “I’ve missed too many anniversaries with my wife”, says Mike smiling, “I’ve got a lot of making up to do”.

2. Bragging Rights

Mike says, “When I was an Entrepreneur, my first angel investor just wanted to brag to his buddies on the golf course”.

Businesses can be quite sexy to investors…you are their prize.  The angel investor investing in a hip restaurant may love the “first priority, best table, they know me by name here” perks he gets.  The angel investor investing in a minor league team may get the owner’s box seats.  So never forget to include these cool perks in your term sheet for your angel investor!  It’s cool to be part of a cool start-up.

3.  Love for Entrepreneurs

Angel investors have been down the lonely path called Entrepreneurship.  It’s often a journey, that they are all too familiar with.  Angel investors return to this….have empathy for what someone is going through.  Proof again, it’s more than just the money (but I want to clearly state through all this…that empathy can be quickly lost if you aren’t doing YOUR part in making him a solid return).

4. Supporting the Community

Just like Entrepreneurs, angel investors enjoy supporting their community.  It’s about seeing your town have sidewalks and trees for the next generation to enjoy.  It’s about not going for a jog and having to working about being robbed.  Thriving communities are built by businesses, that were all once a lone Entrepreneur with a dream.

5. Balanced Portfolios

It’s really funny, because just like angel investors (although on a much larger scale than Entrepreneurs), I see young Entrepreneurs (myself included!) naturally seek to balance their portfolio.  It’s like it comes natural to us.  When the angel investor invests, it’s a little bit of real estate over here, a little bit of bonds over there, and a great company right here.

But I don’t want anyone to forget, it’s never fun if you’re not making money.  No investor wants to get the short end of the stick.  Always do your own financial due diligence for your investor, and give him the accurate financial projections & ROI he deserves.