There are a lot of people who are curious about angel investing and would like to get involved, but they’re not quite sure how it works and they keep putting it off.  Here are a few things you may or may not know about angel investing that may encourage you to take the move and give it a try.

You can use your IRA or 401K for angel investments.  That’s right - let’s say you don’t have $10 - 25k lying around right when you see a hot deal and you decide to pass.  With your IRA/401K, you have a ready asset to put into play.  (Keeping in mind that you should keep your angel investments under 10% of your investable wealth).

Angel groups totally change the game on angel investing.  Maybe you were worried that term sheets, valuation and negotiation - or even just knowing if a deal was good enough to invest in - was too much work and required skills you were unfamiliar with.  Angel groups cut all that work out and use professional methods to maximize success over some deal that your buddies on the golf course might throw your way.  Consider joining Rockies Venture Club or other groups to learn more and share the skills an expertise among many smart people.

Angel investing is not as risky as you think! Many people think angels lose money on most of their deals, but the actual data, especially for angels investing in groups, is much brighter.  You’re swinging for 10X returns on angel deals and indeed some don’t work out, but about half do work out.  Not every deal is 10x of course, but some deals are 30x or even 100x, so it’s best to think about angel investing as a portfolio strategy.  Across the board we plan to get a little over 3X on our portfolios.

Tax breaks and economic development incentives are game changers!  What if the most you could lose on a deal after incentives was 35%?  Would that change your attitude about angel investing?  And what if you paid 0% taxes on 100% of your gains?  No capital gains tax at all?  These are force multipliers that rarely go into calculation of angel returns, but you can choose tax favored deals and leverage your investment with benefits you would never see in the public markets. 

Angel investing can be a team sport.  The financial gains are a benefit for sure, but angel investors are working with smart people with a variety of interesting backgrounds.  They’re curious people and fun to get to know.  Angel investing in groups is a focused social interaction that can provide meaning for your money and meaningfulness in your spare time activities. It’s a great way to meet new people and keep yourself active outside of your everyday life.  Most people find angel investing to be fun and engaging on a variety of levels.

It’s not all about what you GET, but it’s also what you can GIVE. Angels often coach and mentor startups and help them in ways far more valuable than just capital.  You may meet a founder that you can help through one of RVC’s many mentoring programs. 

Angel investment is far from philanthropy, but it can feel like it sometimes when we invest in “impact” companies that provide not only financial return, but social or environmental benefits as well.  RVC’s cleantech group, for example, sees innovative deals with clean energy, water resources, recycling and more. Wouldn’t it be great if your charities paid you back?  Well, that’s one of the benefits of angel investing!

If any of these points makes you think this is a great gift for someone, with your membership gift they can start by taking some workshops at the Rockies Venture Club and we can take them deep into the technical aspects of angel and venture capital investing, or they can attend our pitch events and angel forums and observe the process and watch how others evaluate deals and compare that to your own impressions.