Angel Investing 101: Getting Out There and Getting Started

This blog article was written by Ingrid Vanderveldt, Entrepreneur-in-Residence at Dell, an ACA annual partner.

My journey and experiences on both sides of the table, as both an entrepreneur and an investor, have made me aware of the special relationship between investor and investee. When both sides strive to create maximum value, beyond the traditional financially-focused benchmarks, the relationship, fostered well, can produce tremendous results that will spill into every other area that leads to longstanding success.

Form a support group.

Before you start any new undertaking, it is helpful to prepare; investing is no different.

Building a strong group of mentors and supporters will prove to be a critical resource throughout the lifecycle of your investment endeavors. In addition to gathering industry experts and individuals who can provide access to people and resources that you will need, I often urge women investors to form or find a group of women, specifically, with whom their values align. Similar to the Dell Women’s Entrepreneur Network ‘Pay it Forward’ model, many women enjoy investing because it is an opportunity to help other women break down barriers, climb past plateaus and take their venture to the next level.

The great news is that recent data shows that the number of female investors is increasing. Because women often build and conduct business differently, I’ve found that they also invest differently. Therefore, having a strong network of like-minded women around you is extremely valuable as it can serve multiple functions, providing support from similar perspective and experience. I’ve found that women investors investing in other women tend to have a more well-rounded approach. Often these women recognize and value the big picture thinking that is part of being an investor in the first place. Perhaps most importantly, in my experience, women investors bring the resources, insight and connections to bear for their portfolio companies and their CEOs.

Getting started

By definition, investors are in a position to express their support of a business by leveraging capital to invest in that business. Many would-be investors are discouraged because they think that they need to have advanced degrees or tons of cash to start investing. In reality, the barrier to entry is relatively low and almost anyone with a passion for learning and a bit of capital can become an angel investor. The thing to remember here is that you can invest at your own pace. Whether that pace means spending thousands on seed money for an early stage startup that you think has what it takes or a few hundred on an interesting Kickstarter campaign that you’d like to see come to fruition – the key here is just starting!

Once you have made the decision to be an investor, have found a company that you think is worth backing and have gotten your finances in order, you’re ready to take the next step. There are a few fundamental differences between funding rounds for angel investors and VCs; one of which is investment size. In a traditional sense, the investment community normally considers a "Series A" round to be a rather large round of funding. These rounds are almost always upwards of $1 million and sometimes up to $5 million, and often these funding rounds are led by VCs rather than angels. There are a multitude of readily accessible documents and guides for dealing with a Series A venture round, but what about the investments made by angels? The investments made by friends, family or angels are most often referred to as “Series AA” or “Seed Rounds.”

Your first round of funding can often be pretty confusing, especially for the uninitiated. This is exactly why, Y Combinator, a Silicon Valley based incubator that deals solely in “small” investments put together a list of equity financing documents specially crafted for angels in Series AA rounds. The documents, which include sample term sheets, consent forms, etc. can be located here.

Resources for New, Female Angels

If you’re looking for less documents and more information, Pipeline Fellowship, an investment boot-camp for women, has a wealth of information for women who are looking to get involved with angel investing. Founder, Natalia Oberti Noguera and I recently spoke together at a session at SXSW 2013 and I think this program is one of the best ways to learn about angel investing. If you don’t want to take my word for it, just look at their track record; since launching its first angel investing boot-camp in April 2011, the Pipeline Fellowship has trained over seventy women, who in total have committed more than $350k in investments. Springboard Enterprises, a network and accelerator for women-led companies which I also serve on the Advisory Board of, is another place where you can connect with a number of active women angel investors and women-led companies who are actively looking for investors.

The Bottom Line

You don’t need to be a millionaire to be an investor.

There are a number of ways to get involved, all of which have varying degrees of commitment levels and capital needs. You can be an investor just by getting started in a crowdfunding deal, investing in a friends venture or even a brand new startup. (Editor’s note: equity-based crowdfunding by unaccredited investors is not yet in effect in the US, awaiting rulemaking by the SEC. Contribution or lending type crowdfunding is active at this time, with Kickstarter being an example.)

Finally, as an angel investor it’s important to always look at what you can and cannot bring to the table. In my experience, a majority of today’s startups and Fortune 50’s alike are looking for more than just capital. Again, as women build and conduct business differently, this is at times more evident in women-owned ventures, where the women are looking for mentorship and support. It is extremely important be clear about the type and level of commitment you are seeking, and also what you are expecting to get from the companies you fund.

What you need to consider before making a commitment is whether or not this particular investment is right for both you and the business you are seeking to fund. At this point, I’d recommend taking some time to forget about the money, take a step back and see if the company’s big picture aligns with yours. If your end goals align and you still have the desire to invest, there are almost always ways to become an involved, active and value-added resource as an investor. Your first investments will likely be exhilarating and maybe even a bit nerve-racking so be sure to lean on the support system you’ve built for yourself if things start to go sideways.

These early investments as an angel may be big hits or equally big misses, but regardless, make an effort to roll up your sleeves and stay involved, keep educating yourself, and continue paying it forward to your support network - you never know when you’ll need them next.

Entrepreneur and Investor, Ingrid Vanderveldt has made “Empowering a Billion Women by 2020” her mission. By leveraging her business, policy, and media initiatives, Ingrid strives to guide motivated women to success and help make their visions a reality by providing the tools, technology & resources. In business, she is the Entrepreneur-in- Residence for Dell Inc. and the Creator/Curator of the Dell Center for Entrepreneurs and the $100M Dell Innovators Credit Fund (DICF) to power entrepreneurs worldwide.@ontheroadwithiv