Angel Investors: The Art of Evaluating

A chalkboard that says 'Where to Invest?'

In the section on Evaluating, in the book “Winning Angels,” authors David Amis and Howard Stevenson tell us there are things to look out for when weeding out the not-so-good investment opportunities. Angel investors have to stay ahead of the game when it comes to choosing the right idea to invest in. Notably, the single most important piece of advice here is knowing what type of entrepreneur you are dealing with. There is the “serial entrepreneur,” the “empire builder,” the “lifestyle builder,” the “high-potential entrepreneur,” the “almost there entrepreneur,” and the “wanna-be entrepreneur.” (Amis & Stevenson, 2001) I feel that one of these stands out as the least risky entrepreneur and one stands out as the most risky. In my opinion, investing in the serial entrepreneur’s idea makes the most sense, because this person has been there and done that and knows what does and does not work. The wanna-be entrepreneur seems like the biggest liability, because their ideas can lack “so many of the fundamentals needed for early-stage success.” (Amis & Stevenson, 2001) What it comes down to is that angels have to be able to distinguish between good and bad ideas and good and bad entrepreneurs.

 

Resources:

 

Amis, D., & Stevenson, H. H. (2001). Winning angels: The seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.

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