How to be an angel investor in early stage startups when you don’t have any money

this is what I imagine everyone tweeting against angel investing looks like

Ok FIRST OF ALL looking cool on twitter is a totally valid goal

Personally, I do the weirdest shit to look cool on twitter, and I have tons of fun and dope opportunities have come my way because of it. If anyone tells you it’s not a worthy objective it’s because they are resentful their parents didn’t let them have fun as a child and so they insist on validating their own experiences by attempting to perpetuate this trauma unto you. Make like the buddha and just walk away from that.

Seriously, I do ALL kinds of bizarre things for made-up internet points

But more importantly, angel investing is AWESOME 🔥

By investing in private companies I’ve learned tons: deep insights on the industries that startups are building in, and I’ve also developed skills on the meta level like how to evaluate the total market size for an opportunity, what are different ways to represent business fundamentals, and what types of companies are most attractive for downstream investors.

How to Angel Invest When You Don’t Have Any Money

I created this 2x2 matrix (startups use a lot of these) to help you find the best option on how to angel invest when you have no money — it all depends on where you’re starting from in terms of knowledge and network.

No People + No Knowledge

If you don’t have a network of founders and you don’t know that much about businesses, spend time on sites like Republic and Angellist. You can invest in startups raising there and get equity, but the best part is that you actually don’t have to invest at all! You can still learn a ton from the companies that are raising on them by perusing their decks, weighing valuations, seeing how much they go on to raise, etc. You do have the option to invest (starting at $10) and when I invest — my Republic investments are here — I almost always invest just the minimum investment size.

  • Learn things ✅
  • Build a reputation 🦚 you can if you’re active on twitter etc. about your investments though it’s a bit harder than angel investing ™️ because your name isn’t on the cap table
  • Private company equity 🐢 if you put some money in, you will get equity in the company

Know People + No Knowledge

If it seems like everyone you know is starting a company but you don’t know which ones are good — trust your gut on which of your friends you think will build a big company, and write tiny checks to support them and get equity. This is the only strategy I’m recommending that definitely requires some money, but not as much as you think.

It is totally viable to write small checks like this — not every founder will take them but if you’re friends they likely will.
Great advice from Alex for founders on how they can take all these small checks from their friends without the disadvantages.
  • Learn things ✅ by writing tiny checks, you get to go through some cycles of making a decision on who to invest in and seeing how it plays out
  • Build a reputation ✅
  • Private company equity ✅

No People + Know Knowledge

If you don’t have a network but you have a lot of knowledge, you should be a fantasy angel investor. I think this is quite a good idea, and so I’m sure it’s not mine, but I can’t remember where I saw it so apologies for not giving you credit! (Comment below if you know whose it is, and you too can have 🤡 internet points).

  • Learn things ✅ you exercise your skills of finding out about companies, evaluating them, and being critical of your analysis
  • Build a reputation ✅ publishing public write-ups definitely could help you build a reputation
  • Private company equity ❌ you don’t get equity, but damn you might meet enough people to transition to the small checks bucket.

Know Knowledge + Know People

Ok if you’re good at this and you know lots of people, the stage is set to become a startup advisor. You can help companies, come up with go-to-market strategy ideas, review product specs, provide a shoulder for founders to cry on, source and recruit candidates for them, even introduce them to customers that could become key logos on their home page.

  • Learn things ✅ if you try to evaluate the companies you advise as if you were investing capital instead of time into them, you’d get great feedback on your decision-making process
  • Build a reputation ✅ It’s a bit harder to build a brand as an investor specifically with advising, but you could definitely build a reputation as an advisor
  • Private company equity ✅ One of the big advantages of being an advisor is that you do get startup equity, and could get some idea of what your financial performance would be if you invested money instead of time. Conveniently, 0.25% is about the same amount of equity you’d get investing a $10,000 angel check into a company with a $4mm cap (it’s common not preferred shares, but whaddaya gonna do).

finally -

There’s a bunch of hullaballoo about being an accredited investor. The reason you have to be accredited to invest in private companies is because there isn’t as much transparency or oversight to prevent you from losing all your money. It’s the same reason driving a car without seatbelts is illegal — to protect you. In most states, you need a seat belt on all public roads — you for sure will not get in trouble for driving to the end of your driveway. Like most rational people, I advise you to wear a seatbelt on the freeway. And if you have a history of backing into your mailbox uh, you should buckle up as soon as you sit down in your car. If you’re looking for hard and fast rules or guidance on being accredited, early-stage startup investing might not be a good fit for you because it’s also a personal decision weighing risk and reward.

In conclusion

Because angel investing has done so much for me and people often ask me how to get started, I wrote this guide on how to put time and energy into the startup scene to make the benefits of angel investing more accessible. Putting money into ETFs is super outdated advice because you don’t learn shit, it doesn’t do anything for your career and you’re not going to make enough money to catapult you across class boundaries. Meanwhile angel investing can help you learn new things, develop skills, build a reputation, have fun, and (potentially) create long-term returns. Good luck and have fun!

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Maia Bittner

Maia Bittner

according to @pburke24 “founder of Pinch and a Bellinghamer! Also, a very cool person who tweets interesting things about startups and other stuff”