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Do You Have What It Takes to Be an Angel Investor?
What does it take to be an angel investor? And, more importantly, do you have "it"?
Looking at examples of angel investors can teach you a lot about what it takes to be a successful angel investor.
We reviewed the most successful angel investors and analyzed the characteristics of angel investors. What we discovered are specific traits and actions these individuals share.
Below we break down these attributes, and we learn about some famous angel investors.
Are you wondering if you have what it takes to become an angel investor? Read on.
The Top 4 Characteristics of Angel Investors
Angel investors are like everyone else. Each one is different.
But there are specific characteristics of angel investors that enable them to make wise investment decisions. Below are the top four characteristics of successful angel investors.
No. 1: Confidence
At the top of the list is confidence.
The most successful angel investors understand what they do and do not know. This self-assuredness enables them to rely on their instincts when picking startups to invest in.
The angel investor will likely pass if the company is in an industry they don't understand. On the flip side, if the angel investor knows the startup's space, they're well-positioned to ask poignant questions of the business's leaders to determine if it's a good investment.
Sometimes knowledge of the company's founder and confidence that arises from his or her past record of success is enough to spur an angel investor to invest, even without much familiarity with the specific industry.
No. 2: Courage
The most successful angel investors also have courage.
Any type of investing is inherently risky, including angel investing. Becoming involved in a venture that is not 100% guaranteed success requires an element of daring, but angel investors are able to decrease the amount of risk they take by smart decision-making.
Looking at examples of angel investors, time and time again, you see people brave enough to put their money on the line.
They're not blindly courageous, though. Because these angel investors are confident in their knowledge and instincts, they can make tough investment choices.
No. 3: Trustworthiness
Also on the list of characteristics of angel investors is trustworthiness.
Angel investors give startups money, but they also provide guidance and mentorship. A company's founder needs to know they can trust the angel investor to give their best advice and that the investor has the business's interests in mind.
No. 4: Engaging
Angel investors are engaging. Many investors find deals through their networks and relationships.
Jeff Bezos is a perfect example. He became an angel investor in Google through a former Amazon employee, Ram Shriram, who went to work for Google. Through that relationship, Bezos invested about $250,000 into Google in 1998, which grew to at least $3 billion by 2017.
These are some of the most dominant characteristics of angel investors. Now let's look at examples of angel investors.
Examples of Angel Investors
Ron Conway is one of the most famous angel investors. He was an early-stage investor in companies such as PayPal and Google.
When reviewing potential investments, Conway says he focuses most on who is running the startups. What the company does and its model isn't as crucial to Conway as who is in charge of the business.
Specifically, Conway asks the startup's executives questions to determine if they're leaders. He wants to know if the founders can grow a team around them and make tough decisions.
For Dave McClure, the fundamentals of the business matter most.
McClure has invested in Simply Hired, PayPal, and more. He bases investment decisions on a company's revenue, business model, and if people are buying what the startup's selling.
Chris Sacca is an angel investor who has made money by investing in Uber, Twitter, and Instagram.
Two things Sacca looks for when weighing investments have little to do with the startups. Instead, Sacca considers if he can help the company and be proud of investing in it.
If so, Sacca might decide to invest. If not, he's comfortable walking away from a deal.
Angel investor Neil Patel looks at the size of a startup's potential market.
Is the company solving a problem many people or businesses have? Patel won't invest in a startup that can't pass that hurdle.
There are multiple ways to evaluate a startup. Angel investors can take into consideration the qualities examined by some of the other investors we mentioned, or a combination of all of them. Ultimately, finding the right fit makes new angel investors feel most comfortable with their investment.
What Characteristics Most Successful Angel Investors Have
It's easy to see specific traits the most successful angel investors possess to make smart investment choices.
The characteristics of angel investors are confidence, trustworthiness, courage, and the ability to engage with others.
You see these attributes in the most successful angel investors. But do you see them in you?
If you'd like to learn more about angel investing, check out the rest of our guide. Visit this page to know the ins and outs of angel investment opportunities. And if you're ready to get started, learn the best startup companies to invest in.