Angel Investing Realities—How to Win Big, Stay Smart & Avoid VC Traps

[Part 3] Guidelines for Angels

1. Understand the Risk

• Assume every investment could go to zero.
  
• Liquidity only comes at an exit — not at Series A/B rounds, even if valuation increases.
  
• You must be prepared for a long-term, illiquid commitment.
  

2. Be Patient and Selective

• Deal flow is abundant; capital is not.
  
• Exposure is valuable — view many deals, but write very few cheques early on.
  
• Avoid early-stage euphoria — most deals are not winners.
  

3. Diversify with Intention

• Expect only 1 in 10–20 startups to deliver strong returns.
  
• Build a diversified portfolio slowly over years.
  
• Avoid rushing — preserve capital to seize better opportunities later.
  

4. VC Power Law ≠ Angel Power Law

• VCs follow the power law due to fund constraints (time, team, capital deployment mandates).
  
• Angels aren’t under these pressures — quality over quantity is more feasible.
  
• Don’t mimic VC behaviour; optimise for learning and asymmetric returns.
  

Angel Realities vs. VC Realities

Starting out:

• Low skill, constrained capital, limited deal access.
  
• Make small, early bets to build experience and learn decision-making.
  
• Participating in syndicates accelerates exposure and learning.
  
  

For life-changing returns:

• A $1,000 cheque that 100x’s = $100k
  
• A $10,000 cheque that 100x’s = $1M
  
• Aim for returns that matter to your financial goals.
  

Syndicates & Scaling Capital

• Syndicates allow you to:
  
  
  • Pool capital
    
  • Diversify with small cheques
    
  • Learn from others’ due diligence
    
  • Participate without obligation to invest
    
    
• Carry interest (e.g., 28% on a 10x return) can result in material financial outcomes even at lower multiples.
  

What to Focus on as a New Angel

1. Invest in your skillset: Diligence, judgment, and analysis improve with reps.
   
2. Leverage syndicates: Learn without risking capital, gain access to stronger deal flow.
   
3. Optimise your outcome levers:
   
   
   • Not just cheque size — structure (e.g. carry), collaboration, and access also drive success.
     
     

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