Monday, December 12, 2016

Why I do my angel investing through my family office.

I've been an angel investor for quite a few years, and I've made lots of mistakes along the way. In the beginning I would invest through networks and syndicates and this had lots of advantages because it accelerated my learning process. I could piggyback on the wisdom of others who had been doing it for many more years.

This had its own set of issues however. For example , the process can be fairly bureaucratic because it takes time to get everyone on the same page, and this can be frustrating. Because there are so many people involved, there would often be differences of opinions - for example, when it was time to raise the next round, some of us would be supportive, while others would not. This would cause a lot of grief - not only for the founder, but for the angels as well. This is why I decided that I should try investing on my own.
Now, since this can be a fairly large chunk of money, I do this through my family office. The whole point of being an angel investor is not just to sign a cheque - you hope to add value to the founder's life. This is why having a family office helps . It allows us to set up a systematic framework and a process which we can follow.

This is not just for doing due diligence before signing the cheque - it's  also for handholding the founder afterwards , in case he needs any help with tweaking his business model or raising another round of funding. He knows we are there to assist him.

The advantage of a family office is that many heads are better than one, which allows us to be much more thoughtful. This is important because the decision as to whether to invest or not often depends on how you judge the character and integrity of the founder. Because this is intangible, it can be very hard to do . This is why we plan multiple rounds of interaction with the founder . This offers us different perspectives , and we agree to find him only when everyone agrees that he is a good guy .

As an angel I feel my job is to help catalyze the founder's success, which means we are in a service industry. We try to play to our strengths. Our weakness is we're not a VC fund - we don't have the deep pockets which they do . On the other hand , because it's my personal money , we are a lean and mean machine. We are much more agile, and can be flexible. I'm not answerable to some institution, and can take idiosyncratic bets.

This means that sometimes I am likely to be impulsive. Having a family office provides structure and balance which helps me to ensure that we follow a process . I can listen to both my heart and my head. I don't get carried away just because I have fallen in love with the founder.  Finding the right balance is extremely important for an angel .

Being able to do it through a family office, which has financial experts to guide me, is invaluable. It allows me to increase my bandwidth, so we can screen many more deals. It also gives the founder confidence that we are there to support him after we have funded him - after all,  running a startup is a marathon, not a sprint. Since we now have quite an extensive portfolio, we are well connected in the ecosystem, and can use our network to open doors for the founders, allowing us to marry the agility of  an angel with the systematic processes of a VC fund. We try to be open and transparent about our process, because we value the founder's time, and our reputation !

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