Today, we’re going to go over some tips on the accredited side of online startup investing.
Tip No. 1: Don’t share information about deals. On accredited sites like AngelList, all of the deals are considered private. And if the syndicate finds out you’re sharing deal details with others, you could be removed from the platform and even banned. After the deal is complete, you can say you invested in the company, but you can’t share details about its traction or the terms of the deal.
So don’t forward deal invites to friends or post about them on social media. If you want to invite a friend to a deal, ask the syndicate lead if it’s okay first.
This is very different from equity crowdfunding sites like Wefunder, where all deal details are public.
Tip No. 2: If you’re investing in startups whose founders you met personally (offline), you’ll probably want to pass on at least 95% of those deals. You’ll have to get very comfortable saying no. This isn’t easy for most people. And that’s one of the primary reasons I recommend most people start out investing on quality online platforms such as AngelList.
You can invest in a higher percentage of early-stage deals on a site like AngelList, where all the deals are selected by successful angel investors. My investment rate on AngelList is around 12% (meaning I invest in approximately 1 in 9 deals I am invited to). In my favorite syndicates, I invest in as many as 20% of the syndicate lead’s deals.
However, I am rather choosy. You could easily invest in a higher percentage than I do. If you don’t think that you have a good sense about which deals are “good” yet, then it’s actually okay to invest in every deal at first, as long as you’re in a quality syndicate and can risk the money.
Tip No. 3: Offer to help startups. Almost all of us have some skills we can contribute to early-stage investments. When you’re applying to a syndicate on AngelList, you should always list ways that you are willing to help. If you have a professional skill that is valuable, offer it up. It can also be as simple as offering to test products or offering advice based on your own business experience.
Helping is a big theme in the early-stage investing world. People like to invest alongside other helpful people. In the early stages, a helpful group of investors can go a very long way. This is one of the most unique aspects of early-stage investing – and one of my favorites. We can all actually have an impact on the outcome of our investments. This is very unlike investing in large stocks, where the companies are so big that your personal efforts could never make a dent.
Tip No. 4: Fill out your profile completely on AngelList. Add as much detail as possible. When you’re applying to join syndicates, the lead investor will carefully examine your profile. Make sure that they like what they see. Be honest and thorough in your description of your work experience.
If you’ve started any businesses, be sure to cover that completely. Having entrepreneurial experience is a huge deal in the startup investing world. No matter what area your experience is in, other investors will respect that you’ve been a founder yourself.
Tip No. 5: Have fun. Startup investing should be fun and exciting. It may take some investors a while to realize this, but I promise it’s true. There’s nothing more rewarding than investing in an early-stage company and watching it blossom into a mature and fast-growing company.
So don’t take things too seriously. This isn’t stock market investing, and you can’t look at it like a science. If you strike out on an early-stage investment, don’t beat yourself up. You took a chance, and it didn’t work out. That’s okay. Everyone misses occasionally at the early stages. We expect that going in.
So try to relax, have fun and find some great investments.