What's the best way for beginning investors to get started? originally appeared on Quora - the place to gain and share knowledge, empowering people to learn from others and better understand the world.
Like everything else, investing takes practice -- lots of it. But, you don't need as much money as you might think. If you're going to start angel investing, here are some quick tips:
- Invest in a LOT of companies (for practice and to learn); you will mess up. And that's ok. But you need a large diverse portfolio to learn. Aim for 10 per year for 3-5 years.
- You don't need a lot of money to get started. I know some angel investors who invest only $1k per startup. At $1k, you can fund 10 companies with just $10k on hand. This is doable for most frugal professionals. The best startups will still take a small check if you are a) a fast decision maker -- decide in 1 meeting or on the spot for a small check like $1k and are one of the first checks into a round, b) are value-add (can offer helpful advice or introductions), and c) are not a pain in the behind.
- Be value add. If you're not investing a lot of money, offer to make introductions or help if you have a relevant skill. For example, if you are a designer, offer to be a guide for design help for 1 hour per week for a few weeks. If you don't have relevant skills, that's ok -- there may be introductions you can do to other potential angel investors. By providing more than just money, you will not only be useful to your portfolio companies but you will also learn a lot about them and figure out quickly whether you made a good investment. It's important to get this feedback so that you can learn and iterate on what you look for in your investments.
- Network with other angels for deal flow. Get into deals that other more experienced angels are doing. Start there to get deal flow.
- Expect to lose money. If you're investing $1k per company and invest in 50 companies over 5 years, expect to lose $50k. On the upside, you'll make money in say 7-10 years. On the downside, you'll lose everything. Treat this as "learning-money" -- what you might otherwise use to pay for an MBA or whatnot. If you're not prepared to lose this money, then don't angel invest.
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