The most popular word in toddler language is “NO!” As they grow, they still end up speaking in one word sentences. But the one that trips most parents up quickly becomes “WHY?”
Curiosity drives growth. It works for children. It works for entrepreneurs. And it works for investors. The answer to WHY leads to HOW.
“I look at two things while angel investing: Are you solving an important problem? Do you care about the end users?” Gary Vaynerchuk
Today, I just want to address the “Why” question. Why do you want to be an angel investor? What’s in it for you? And if you don’t have $1,000,000 in assets above and beyond your primary residence, or make $200,000 or more, can you even participate? Are there any loopholes and do you want to jump through them? And who is jumping through them to build a successful portfolio in the startup space?
Keeping up with the GenZ’s
Did you know that there is a growing number of Gen Z investors participating as angel investors, getting together in social networking spaces and even Slack and some of them are still in their teens? According to Wired, teens and young adults are getting in at a small level, usually around $2500 at a time, gaining future equity in the companies they invest in, based on the success of the venture, while their parents are building portfolios in more traditional assets like real estate.
The starting age for entrepreneurs is getting younger and younger. Gen Z statistics from business.org state that over 50% of high schoolers say their parents are encouraging them to get work experience early, and 42% believe they’ll invent something that changes the world. Plus, notice the attention that younger Shark-Tank presenters get from the venture capitalist panel! They know their product, their market and their numbers. Now 228 universities globally have entrepreneurship programs now where even in the 1990s, there were very few programs. [source: Google, Kauffman]
Access to financial literacy education through programs like The Boardroom and other Raging Bull resources helps new and experienced investors alike to keep up with trends, research and as the market changes, learn fresh and relevant strategies and tactics for dealing with those changes.
More GenZs are working in tech fields than ever before. Between 2019 and 2020, STEM (science, technology, engineering and math) employees increased by 6 million jobs, while non-STEM jobs increased by 5.2 million [source: BLS.Gov] Chances are they’re getting hired by start-ups, or creating the start-up. In fact, part of the compensation package with such a startup may be in the form of equity, where founders attract talent and compensate for a salary cut in exchange for a future stake when the company is sold or goes public. [source: Techcrunch]
The Startups of Yesterday
It is probable that the device you’re holding right now (or what’s on that device in the form of an app), features in the car you’re driving, the way you shop, or the way homes are being built today came about as a result of angel investing. Angel investing is synonymous with the word opportunity. Angels provide a way when there is no other way.
You see, many of the greatest inventions, platforms and apps in our world would not be in your hands if it weren’t for angel investors. Angel investors are an elite group of individuals who provide the capital that startups require to give their idea a true run for its money. WIthout the financial support and backing of this class of movers and shakers, startups would potentially flop – not because of a bad idea – but because of a lack of resources.
Angel investors are willing to go out on a limb and invest in something that doesn’t exactly come with 10 or 20 years of financial books and proof of profit. Angel investors are investing in the wild, wild west, and many times, that’s how they like it.
The Gig Economy
Uber, Lyft, Airbnb, Grubhub, DoorDash, Fiverr and others are changing the way we work. It’s referred to as the sharing or collaborative economy. [Source: Merriam-Webster] The Gig Economy is changing the way we buy; it’s changing the way we work. One in three Americans have a side-hustle and 61.1 Million Americans plan to start a side hustle this year. [source: Zapier] Airbnb started in 2007 as a few guys in San Francisco who couldn’t afford their rent. They got a few air mattresses and by 2019 they were surging past a $47 billion dollar ipo valuation as they entered the market, not at $68/share, but instead at $146 per share.
Angel investors are at the heart of this economy. The emergence of education technology, gaming, health technology, environmental innovation… There are endless opportunities, and startups are popping up in record numbers. That’s probably why this has been dubbed “the golden era of the startup.”
The Learning Curve of “HOW”
Getting started is always the hardest part and where most people give up. The possibilities of investments in successful startups always have the appealing “results-not-typical” launches like Facebook and Airbnb, but setting expectations is the first EQ (emotional intelligence) skill of successful investors and is key to managing risks like how much you decide to put into a venture, how you drill out the emotion that could draw you into sympathy investments and dial-up the Shark Tank ™ questions that will lead to a logically smart tactical investment choice.
Learning what you need to know – how do you get the information about a startup and even start getting founders to reach out to you and people in your circle? Stay tuned. Over the next few weeks, some of that education will be right here, in this email.
“Why” is always the first question to answer. What are your reasons for investing in general? Why would you choose stocks, bonds, options, currencies, crypto or angel as your investing vehicle? Why would you choose one startup over another?
Once you know “Why”, then your personal path to “HOW” will be much easier, and look a lot more like an upward trend instead of a messy scribble picture!