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Write Your First Angel Check 😇

Resources for new angel investors

Author

Michaela Gordon
May 26, 2024

The Early Newsletter | 18th Edition

Happy Sunday! ☀️ After a few great suggestions (thank you, everyone!), I’m trying something new and saving the VC roles for the end of today’s newsletter for better readability. Excited to dive into today’s topic #angelinvesting 👼

💹 Today’s schedule:

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Early Angels: Writing Your First Angel Check 😇 

Google’s AI-generated definition of an ‘angel investor’

I’m especially excited for today’s topic - a big ‘why’ behind this newsletter is to bring light to traditionally gatekept pockets of the VC & startup ecosystem... a category that angel investing definitely fits into. Growing up in the Bay Area, I always thought of angel investing as a super exclusive (and lucrative) hobby for established VCs or wealthy people — a point that’s even found in the AI-generated definition of the term (see above.) This is still true to a certain extent, but there are also rarely-spoken about openings for early-career professionals to participate in their own right.

While there are still limits to participation for angels who don’t meet the standards for accreditation, I wanted to highlight the space and a few ways to get involved in angel investing without accreditation status… and the case for starting early ⬇️ 

Note: There are certain investments only open to accredited investors, and for good reason. You can see the requirements for becoming accredited here. This post is for those who don’t fit the accreditation criteria but still want to angel invest.

Image courtesy of Entrepreneurs Collective

What is angel investing?

Angel investors write checks into startups as individuals, rather than on behalf of a firm or institution. Angels invest their own capital, typically at a smaller check size and earlier point than most VC firms. Read more about angel investing here. 

The case for angel investing early in your career

There are a few reasons why I (and several of my friends) decided to start writing small checks 2-3 years into our careers, when we don’t have millions to throw around ⬇️ 

💪 1) Developing a personal investment muscle and thesis

The companies you’ll see as an angel investor are at a very early stage - sometimes just a team and idea with no financials to work with. Unlike working at a VC firm, there is no firm-wide mandate specifying the parameters within which you can invest, or providing any standardized investment thesis. This challenges you to come up with your own thoughts on market/team/product, and helps you hone your personal investment thesis and deal sense.

😬 2) Putting skin in the game

I love the idea of being able to put my money where my mouth is as an angel investor. You have full control over which investments you make and — win or lose — the ball is in your court. This isn’t always the case when you’re investing as part of a VC firm, where you understandably need to go through committee approvals, win buy-in from senior members, etc.

🌈 3) Building a portfolio early

I think this is one of the strongest arguments for writing checks, no matter how small, early in your career. Regardless of whether you want to become a VC in the long-term, establishing your presence as an angel investor pushes you to think deeply about cutting-edge markets, build community within the startup ecosystem, and establish a track record that you can take with you as you grow in your career. If you do want to become a VC or start your own firm down the road, being able to point to an angel portfolio is incredibly valuable. In fact, many top fund managers started as angel investors and leveraged their track record to raise their own funds. (e.g. a16z, Scribble Ventures, and many more!)

How much can I invest if I’m unaccredited?

As an accredited investor, there’s no upper limit to how much you can invest in a given round, year, etc. Stricter rules apply (and rightfully so) for unaccredited investors.

Unaccredited investors take advantage of the SEC’s Reg CF exemption (Regulation Crowdfunding) which allows investors to invest the following amounts over the course of 12 months:

A) $2,500; or

B) If your annual income or net worth is less than $124k, you can invest 5% of the higher value between your annual income or net worth; or

C) If your income and net worth are both equal to or greater than $124k, you can invest 10% of the higher value of the two, with a maximum annual investment amount of $124k.

Wefunder’s community fundraising platform

OK then, how do I get started?

Angel investing as an unaccredited investor is made possible through equity crowdfunding. I wanted to share the steps I took to make my first investment.

Step 1) Dive into the startup ecosystem however you can by attending panels and demo days, researching industries, and reaching out to founders building cool things. (First angel checks often go to your friends/classmates/coworkers - people you know and trust personally.)

Step 2) Decide ahead of time how much capital you’re willing to contribute to angel investments on an annual basis. Again, see the contribution limits for unaccredited investors here.

Step 3) Find a platform to invest through. I’ve personally found Wefunder to be the best option in terms of startup offerings and ease of use (not sponsored… I wish!) I recently wrote a check into Beehiiv’s Series B raise via their community Wefunder round and the process was seamless. There are also other platform options to choose from like StartEngine and Fundable.

Step 4) Start investing when you get the right opportunity! It can be helpful to start even with small checks of $100 or so, if you don’t yet feel comfortable with larger amounts.

Disclaimer + the case against angel investing in your early career

I do also want to acknowledge the risks and limitations of investing as an unaccredited angel:

  • Financial risk: Angel investing is high-risk - I make sure that I only invest amounts that I am able to lose or have tied up for 5+ years.

  • Capped investment amounts = capped upside: Since you’re limited in the amount of capital you can invest, the overall upside of your angel investments will be smaller at this stage compared to later in your career, when you become accredited and can write larger checks. (e.g. a strong 5X return on a $5k investment is still only $25k)

  • Access to the best deals takes more work: Many founders will default to accredited angels with more experience for their first checks - as an unaccredited investor, you need to get creative and put yourself out there to add value and find deals early.

  • There are fewer crowdfunded deals: Not all startups will join a crowdfunding platform like Wefunder, or offer a community round like Beehiiv - in these cases, unaccredited investing is a no-go.

For me, the tradeoffs are worth it to be able to meet amazing people, start building a portfolio early, and hopefully become a better investor. However, every person’s situation is different.

I hope this overview was helpful and shared some new opportunities for those who didn’t know angel investing was possible without being accredited. If you’re an angel investor, please reach out - I’d love to chat! 🙂 

Angel Investing Resources 💸

Maggie Sellers | Angel Investor & Partner @ Vanterra Capital

Here are a few additional reads/resources I’ve found to be helpful:

New VC Roles This Week 💫 

Internships 🤓 
Analyst 😍 
Associate/Senior Associate 😄 
Operational Roles 🤠 

❗️ Note that many VC roles are posted without application deadlines and filled on a rolling basis - if you see one you like, I’d recommend applying within a week, or as soon as possible!

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And that’s all for this week! You can find me on LinkedIn and X. As always, feel free to reach out to [email protected] with any questions or feedback. I’d love to hear from you! 🙂 

-Mic

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