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Investing as a micro angel
This is something I've started talking about on Medium, but it's a topic I think would be hugely relevant to the maker community here...
Basically, the idea is that angel investing can be done at the micro level.
The traditional concept of an angel investor is normally a former founder, with a multimillion dollar exit behind them, or a wealthy individual with a large personal fortune who can afford to embrace risk as an independent.
But there is room in investing for smaller scale crowdfunders, investment squads and individuals to back companies they love as micro angels. People who have enough cash flow to back ideas with a 4 figure check and become a thriving part of a startup’s journey.
This is particularly relevant for marginalised founders, founders of colour and queer/trans entrepreneurs.
We face massive hurdles to gaining traditional funding that can prevent us from using that route to build and scale a business; where we might have a much stronger network of individuals able to invest as micro angels.
Prof Panayiotis Ketikidis puts the role of a micro angel well:
“Support structures for startups such as acceleration programs and incubators may offer funding and mentoring, but this is limited in scope and duration. Venture capitalists can cherry-pick the best teams to invest in, yet there are many worthy startups left behind. The resulting gap in the investment landscape provides an opportunity for small investors to reap large gains — think ‘micro-Angels’ writing average cheques of €10,000 to €50,000. Veryearly stage company valuations are by necessity quite low, and ‘first money in’ Angel Investors can leverage this to their advantage — taking a larger amount of equity at a lower price, along with other advantages, such as discounted follow-on, preferred options, and non-dilution terms.”
There are thousands of investors who put in $1k checks; it’s not a new concept, and you can see it happening in every single startup ecosystem, whether it’s in Sydney or Silicon Valley.
My own journey into startup investing has been colourful, to say the least. I don’t come from a finance background. I don’t come from privilege. I don’t come from money.
https://joanwestenberg.medium.co...
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Sarah Ksikes (Sideklick)
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Interesting topic Joan. Myself I've used crowdfunding platforms to invest as a micro angel investor in over 20+ startups and companies. I've even seen micro angel investing with property developing but never experienced this first hand.
I think its awesome to invest in small startups that you truly believe in, be part of the journey of success for that company. However I think it's rather important to bring up the point of ROI, which is not the same for small investors as it is for major ones.
As with all investments, a return is never a sure thing. However I've noticed that small investments tend to get forgotten about and rarely see any sort of return on investment, wether this is financial or in another aspects. As you tend to get swallowed up by larger investors, dare I say more traditional angel investors. It's almost guaranteed that there will be further rounds of funding in the future.
Somebody who can only afford to invest smaller amounts, tends to feel the hit more than somebody who has vast amounts of money, and often can no longer afford to keep investing further in future rounds, resulting in dilution. Which in turn affects profits but also their involvement in the company.
Traditionally an angel investor tends to actually be involved with the startup, wether with voting rights (that actually can influence decisions) or being directly involved with the company as chances are when you write a big check you end up getting to know the founder of the company you're investing in. As a micro investor you do not have this.
I think the main reason to invest in a startup is always going to be profit related, but equally important is being a part of the future and a part of that company, which is sold as a bit of a illusion to small investors.