Earlier this month, we led our first formal seminar entitled “How to Evaluate Prospective Deals Like a Professional Angel Investor” and helped about 40 attendees get started in the world of small business investing.
For two hours, we worked with this group to share the ins and outs of finding, assessing and engaging startups and entrepreneurs. Through an informal poll, we estimate this group represented about $1 million of investor capital. Some were interested in investing $5,000 to $25,000. Others were interested in $50,000 to $100,000.
Some were young and had full time jobs, but craved the opportunity and upside of investing in a startup. Some wanted to use some funds from a self-directed IRA and one person had recently sold his long-held business and was driven to explore investing to keep his mind and business acumen stimulated.
What all attendees had in common was a desire to understand some of the nuances of small business investing – what to look for, what to expect and what to avoid.
What our attendees learned:
- Understanding the early stage investor landscape, the different types of early stage investors and how investing in a small business is different than buying and selling publicly traded stock.
- The importance of identifying deals that are in areas where direct experience exists.
- The Tangibles: A “checklist” approach of the issues a prospective investor should address with the entrepreneur before proceeding.
- The Intangibles: Issues beyond intellect and into instinct, where a shared sense of trust and aligned purpose are important.
- Actual testimonials from angels who have invested in and have nurtured multiple early stage businesses.
- Forms and compliance: Documents each prospective investor should know about when pursuing a deal, as well as the role and importance of legal counsel in “doing the deal.”
- Action Items and Next Steps: sharing tools and tactical activities that transform small business investing into a systematic process so investors can make informed decisions.
What we learned:
The interest in small business investing is enormous. Through this inaugural conference, we have received local media attention and will soon have some national exposure. We have been invited to host this workshop in three other cities and are exploring two potential national webinars as well. In short, we learned that we have an important role to help coach a new generation of investors.
The diversity of those interested in learning how to approach startup investing is broad. Men, women, all age ranges and ethnicities. There seem to be quite a few people who want to be part of the startup revolution, but don’t have the ability to strike out on their own, or just don’t have their own “big idea” they want to commercialize. But they want to be part of the new business ecosystem and they have some of the estimated trillions of dollars that are “sitting on the sideline” ready to support an entrepreneur with well-prepared business model.
Finally, we learned that responsible investors want to be as well-prepared as the entrepreneurs they are considering investing in. We learned that ActSeed’s Investor Group is a great tool for new investors to evaluate startups looking for funding.
In summary, what’s good for the entrepreneur must be good for the investor, and vice versa too. It cannot be out of balance. Intangibles like trust, synergy, purpose and company culture are important. Investment should only occur when there’s a focus on “business basics” with transparency and reciprocal communication between investor and entrepreneur; this is not the same as buying a share of Microsoft or GE. As a small business investor, you must be engaged as an ongoing partner in helping your business investments succeed.
ActSeed carries a clear message to all participants in early stage business creation and growth: “Preparation for success helps avoid behaviors that lead to failure.”
If you are interested in hosting one of our Small Business Investor Workshops locally or via webinar or if you are interested in becoming a small business investor, please contacts us at firstname.lastname@example.org.
If you are an aspiring seed stage or angel investor and want to get started now, you can join ActSeed’s Investor Group (there is no cost to join) and start applying the principals we share in our workshop immediately. Learn more about the ActSeed Investor Group here.
We are already working diligently to find and guide more investor millions that we can connect to well-prepared entrepreneurs.