Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups

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Plus, It's Really Fun!

The Nonfinancial Rewards of Being an Angel

AS I DISCUSSED in Chapter 1, early-stage angel investments—when approached professionally and over the long term as I outline in this book—can be a lucrative asset class, consistently outperforming most other forms of investment. But unlike putting money into the public stock market, or betting on soybean futures or investing in a real estate fund, becoming directly involved with high-growth startup companies can bring many additional benefits. It's a bit like growing fresh vegetables in your backyard instead of buying canned peas at the supermarket: both end up on your dinner plate, but the homegrown variety tastes better, is more nutritious, gives you a sense of accomplishment, and, if you like gardening, is fun to plant and nurture. So it is with startups.

The term angel originated around the turn of the twentieth century to describe well-heeled gentlemen who would seemingly appear from heaven to provide financing for theatrical productions—traditionally a high-risk proposition. In addition to the potential economic return from backing a Broadway hit, however, the theatrical angel would find himself credited as a producer, invited to opening night galas and cast rehearsals, and sometimes even invited backstage, where there might be an opportunity to meet one of the young chorines from the company. Such romantic side benefits, however, are not typically the case with high-tech startups.

Nevertheless, investing ...