Do You Seed/Angel Invest For Wealth Accumulation? Or Not?

Have been reading Jason Calcanis book, Angel, lately.  I haven’t finished it. I plan on finishing it in the next couple of weeks and will write a review then.  Today, I caught the end of a Facebook Live gig, This Week In Startups, that he did.  Jason has an enviable track record of investing in seed stage startups.

One thing that Jason talks about when discussing the process of angel investing is wealth accumulation.  By the way when I describe it as a process, I want to be clear that it is.  If you aren’t using some process, you are throwing dice.  Being a successful early stage investor is a lot of work.  It’s also a little bit of luck.  You never know who is going to hit it big and who is going to go down.

Jason and I might differ on wealth accumulation as it relates to early stage investing.  Yes, if you are right, you will accumulate wealth.  Ringing the cash register is the end game.  Except, it usually takes a minimum of seven years and most probably ten before any bells go off.  If you are making investments and don’t have cash flow to support yourself you will put yourself in a dangerous financial position.

I had the debate about motivation with a college professor, Greg Oldham.  He co-developed Hackman-Oldham Theory of Motivation.  TL;DR, other things besides monetary rewards are better motivators.

There are other benefits to early stage investing that make it worth your while even without a return on investment.  If these sorts of things don’t get you excited, you should not angel invest. Get exposure through an Angel List syndicate or early stage fund.

  • Meeting lots of new people
  • Working with new ideas, some crazy, some bad, some radical
  • Looking through slide decks and making notes.
  • Reading a lot
  • Going to meetups after your day job ends
  • Making connections that others might not see
  • Meeting people that might try to take advantage of you
  • Helping entrepreneurs build an early stage company via mentorship
  • Mentoring companies even though you aren’t an investor
  • Connecting people to people or customers, even though you aren’t an investor.
  • Expanding your network
  • Adding to your local community
  • Building relationships.
  • Being self-reliant
  • Challenging your own opinions and beliefs

These are just a few of the side things that come with being an active and professional angel investor.  When you get a winner, the money is nice.  But, the truth is if you score 30x on 2 out of 20, you will be in the Hall of Fame of angel investors.  50% will go bust.  The rest will bring different challenges and won’t make you much money.