To be a successful angel investor, you have to have an investment thesis so you don’t throw your money at everything that sounds cool and you don’t have to rely on always being in the right place at the right time to get in on the best deals. You need a strategy, and you build every strategy on tactics. Remember from the previous post: “being opportunistic is not a strategy.”
The 11 Characteristics of Your Strategy
These are the eleven characteristics of your investment thesis. Ask yourself each of these questions, and write down the answer that you are most comfortable with today. Again, be really specific at this point. You can always expand any particular category later as you become more comfortable with your thesis.
- Stage – What stage of a business are you most comfortable with?
- Customer Discovery
- Business Model Development
- Late (Not Applicable)
- Capital Requirement – How much capital is required for the investment to be cash flow positive? How much of that do you want to be your money?
- Location – Do you care where the investment is located geographically? If so, where should it be?
- Market Sector – What market sector(s) do you know really well?
- Technology – Is there a specific technology (e.g., infosec, fintech, etc.) that you have domain expertise in?
- Business Model – What types of business models do you know best?
- Team Model– Are you set on a specific type of team, e.g., one hacker one hustler?
- Margins – What types of margin businesses are you most comfortable with?
- Lead or Follow – Do you prefer to lead or follow an investment round?
- Governance – Do you require ownership control or board control of the investment?
- Deal Terms– What are your preferred financial terms?
Now Write It Down
It’s ok if you can’t put a definitive answer to every single one of these characteristics at this point, but you should be working towards that end goal. Once you have a solid answer for all 11, you’ll be able to write down a few lines that very specifically define your investment thesis.