Brad Feld on Angel Investing

July 5 2010 No Commented

Brad Feld on Angel Investing

My friend, Brad Feld, is a prolific angel and venture capital investor.  More importantly, he is really smart and a genuinely right-minded proponent of entrepreneurs.  Brad wrote an insightful article on June 2nd for Business Insider entitled After More Than 75 Angel Investments, Here’s What I’ve Learned.  This is must reading for all angel investors and entrepreneurs seeking angel capital.

I cannot over emphasize Brad’s point on diversification.  I’ve made 52 investments over the same period of time as Brad has been investing and have learned the same lessons.  Investing smaller amounts of money in lots of deals is the only road to success in this investment class.

Angel investing is an individual sport which allows many variations on the theme.  I tend to do more due diligence than does Brad.  Most of us simply cannot get our minds around a startup investment opportunity over one lunch, as Brad seems to do.  (I told you – he is a smart cookie!)  And, the statistics suggest that good due diligence improves returns to angels in groups.  As I pointed in a December 2009 post Due Diligence Pays Off for Angels in Groups, angel groups who expend a total of 60 or more hours on due diligence per deal can expect returns seven times higher than angel groups who devote, on average, less than 20 hours per deal!  That huge multiplier is the difference between good returns and poor returns for angels.

Brad is a great angel investor, perhaps the best I know.  He has the capability to quickly grasp opportunities presented to him.  For the rest of us, good due diligence is generally required to assure decent returns on investment.

It’s a GREAT time to be an angel.  Find a group and jump in!