Entering the world of angel investing can feel like joining an exclusive club. There’s a lot to learn, and a lot of it isn’t written down. But there’s no need to panic! Understanding the unwritten rules of angel investing will make your investment flight smoother and more successful.
In this guide, we’ll break down the norms that seasoned angel investors follow, helping you feel more confident as you begin this exciting journey. We want to give you everything you need to successfully navigate this landscape.
What Is an Angel Investor?
Before we get into the unspoken rules, it’s important to make sure we’re all on the same page. What is an angel investor anyway?
Angel investors provide financial backing to early-stage companies, usually in exchange for equity. Unlike venture capitalists, who typically manage larger funds of other people’s money, angel investors use their own money to invest in startup ventures. These investments can individually be high-risk but can offer high rewards if the company succeeds.
Angel investors are a crucial part of the startup community. The investment they provide can make a huge difference in helping startups grow, especially in industries that require specialized knowledge (and patience). Some examples include B2B tech, life sciences, and industrial tech. Investors with a personal interest in these fields often find that angel investing is about more than just returns — it’s about nurturing innovation and being part of something meaningful from the ground up.
The Unspoken Code of Conduct in Angel Investing
Angel investing involves money. After all, “Investing” is right there in the name. But it is more than that too. It’s about relationships, trust, and long-term thinking. While there are formal rules and regulations that govern investments, there’s also an unwritten code of conduct that respected angel investors follow. Understanding these basic principles will help you make more informed decisions and integrate into the angel investing community more smoothly.
Collaboration Over Competition: Angel investing is a team sport. While you’re putting your money into a company, you’re rarely doing it alone. Most deals involve multiple investors, and collaboration is key. Sharing insights and working together strengthens the overall investment and helps the business succeed.
Expect Delayed Gratification: Angel investments take time to pay off — if they pay off at all. Experienced investors know that early-stage companies need time to develop and scale. Angel investing is a long-term commitment, and you have to stay patient throughout the long journey, which rarely follows a straight path to success.
Be Generous With Your Knowledge: One of the reasons angel investors succeed is because they bring more to the table than money: they bring expertise. When you share your experience with fellow investors and founders, it not only strengthens your investment but also builds trust and credibility within the community.
Stay Humble: Angel investing involves constant learning. Whether you’re new to investing or have decades of experience in other fields, there’s always more to discover. The best angel investors approach each deal with humility, asking questions and seeking guidance from others in the group.
Engage the Community: Active participation in the angel investing community can set you apart. Whether it’s attending meetings, participating in discussions, or following up on deals, staying engaged helps you build relationships with other investors and get access to better opportunities.
Align With Group Values: If you join an investment club, fitting in with the culture is crucial. At VentureSouth, for example, we pride ourselves on creating a collaborative, respectful community of investors. We have a clear list of our core values, and so will other groups. By aligning with these values, you’ll find more success.
Trusting the Process: Why Patience and Research Matter
One of the unwritten rules that every new angel investor must grasp is the importance of thorough research and patience. Every deal presents a different set of challenges, and seasoned investors know that the key to success lies in conducting proper due diligence.
Conducting Due Diligence: Before investing in a company, it’s important to carefully analyze the business. This includes understanding the industry, evaluating the management team, and reviewing financial projections. In-depth research can help you identify potential risks and gauge the likelihood of success.
Managing Expectations: Many first-time investors expect quick returns, but angel investing is a long game. Even successful companies often take several years to generate returns. By managing your expectations and being patient, you’ll position yourself for long-term success.
Learning from Experience: Every investment is an opportunity to learn, whether it succeeds or fails. Experienced angel investors know that losses are part of the process. The key is to turn each experience into a learning opportunity and apply the lessons to future deals.
How to Become an Angel Investor: Mastering the Unwritten Rules
Angel investing offers the potential for significant financial rewards, but it’s the relationships, patience, and community that set successful investors apart. By understanding and learning to follow the unwritten rules of angel investing, you can enter this exciting field with confidence and increase your chances of long-term success.
At VentureSouth, we believe that by staying engaged, sharing knowledge, and collaborating with others, you’ll not only “make money” but also “have fun” and “do good.” If you’re ready to start your angel investing flight, join VentureSouth, and become part of a community that values learning, growth, and success.