You’ve been pouring all the things into your startup.
Is spreading some cash into different folks’s startups truly good - or simply costly FOMO?
Let’s begin with the factor no one desires to say out loud: In case your startup fails, angel investing in different startups won’t prevent. It won’t cushion the blow. It won’t offset the loss.
Angel investing is similar asset class as your startup fairness – illiquid, high-risk, long-horizon, most-likely-going-to-zero. Spreading just a few thousand {dollars} throughout three or 4 different early-stage firms isn’t diversification in any significant monetary planning sense of the phrase. It’s simply extra of the identical wager.
So if defending your monetary place is why you’re eager about angel investing, I have to redirect you fairly firmly.
The precise diversification transfer is a house deposit
I do know that sounds boring. It’s boring. However boring is commonly proper.
In the event you’ve been grinding for years in your startup and also you’ve accrued sufficient money to place a deposit in your first residence or an funding property, that’s your single most vital monetary transfer proper now.
Property is a special asset class out of your startup fairness. It generates a special sort of worth. It’s (comparatively) liquid. And in Australia, owner-occupier property has a monitor file that startup fairness, by definition, can’t match.
Shopping for your first residence doesn’t imply you’ve given up on the startup dream. It means you’ve performed one thing most founders by no means handle to do: you’ve pulled some worth out of the startup grind and parked it someplace that compounds in a different way.
That’s what diversification truly seems to be like for somebody in your place.
Your superannuation is the opposite factor. In the event you’ve been paying your self a correct wage by means of the startup, your tremendous is ticking alongside. In the event you haven’t been – since you’ve been dwelling lean to increase the runway - then you definately’ve been funding your organization partly by raiding your future self.
Value figuring out. Value beginning to repair.
It’s actual cash, however you might not have been telling your self this.
The case for angel investing as a founder
The actual causes to begin angel investing when you’re nonetheless a founder will not be monetary. Or a minimum of not primarily monetary. It’s for strategic causes.
While you write your first small cheque into one other startup, you cross the desk. Instantly you’re on the opposite aspect of the pitch. You’re studying a deck and asking questions like:
- “Is that this truly a enterprise or only a product?”
- “Does this workforce have what it takes?”
- “What would must be true for this to return 20x?”
These are questions that make you a sharper founder, as a result of they’re precisely the questions being requested about you each time you pitch.
You additionally get entry.
The angel investing world is a community of networks, and when you’re in it – even with small cheques – you begin getting invited to rooms you weren’t in earlier than. Founders who angel make investments early have a tendency to seek out that their very own fundraising will get simpler over time, partly as a result of they’re now friends with buyers fairly than simply supplicants.
And there’s the sample recognition piece. Each deal you see, each pitch you consider, each founder you again (or cross on) teaches you one thing concerning the form of excellent startups and unhealthy ones. That training compounds. It makes you higher at working your individual firm. It makes you higher at avoiding the errors you see different founders making from the skin.
And if profitable investing requires an edge, it’s attainable that as an skilled startup operator, your individual expertise and talent make you higher at judging early-stage startup investments than somebody with much less hands-on expertise (which is most angel buyers).
None of this exhibits up on a stability sheet. However it’s genuinely invaluable.
When it is sensible to begin angel investing, and the way?
Not earlier than you’ve sorted your monetary fundamentals … Meaning: emergency fund, residence deposit (or a transparent plan for it), tremendous on monitor. If these aren’t so as, angel investing is a luxurious you’re not fairly prepared for – no matter how thrilling the offers look.
When you’re previous that time, the rule is easy: Solely make investments cash you’ll be able to afford to lose solely. Not cash you’ll be able to afford to lose a few of. All of it. As a result of with early-stage startups, shedding all of it isn’t the worst case — it’s the bottom case for many of your portfolio.
Begin small. You don’t want to jot down $25K cheques. Most Australian syndicates — together with M8 — allow you to in for a lot lower than that. You may be capable of unfold $25k throughout 4 to 5 startups, or again three now and reserve somewhat to spend money on a follow-on spherical for the best-performing one later.
A syndicate is the best place to begin since you’re pooling with different buyers, you get the good thing about another person doing the heavy lifting on deal movement, due diligence and negotiating beneficial phrases, and also you’re not going it alone on a choice you don’t but have the sample recognition to make confidently.
Don’t attempt to win by choosing the following Atlassian* in your first cheque. That’s not how this works. Construct a portfolio over time – a small, considerate portfolio of firms the place you genuinely perceive the issue they’re fixing and the place you’ll be able to truly add worth past the capital. In the event you can’t reply, “Why would this founder need me particularly on their cap desk?”, that’s value sitting with earlier than you write the cheque.
On the finish of the day
The actual query isn’t whether or not to angel make investments. It’s what you’re making an attempt to get from it?
In case your reply is: “Monetary safety from my startup failing” – that’s not it, and you must redirect that considering towards your private home deposit and your tremendous.
If the reply is: “I wish to learn to consider startups, construct a community on the investor aspect of the desk, and begin growing the talents to finally do extra of this” - welcome aboard.
That’s a professional, invaluable, and achievable purpose. The monetary upside may come too, finally. However the studying begins from the primary cheque.
Get your monetary home so as first. Then write small cheques into firms you genuinely imagine in, by means of a syndicate, and deal with each deal as a masterclass within the factor you’re already spending your life on.
That’s the way you begin. The whole lot else is simply refinement.
*You is likely to be considering, “The following Atlassian? That’s a horrible investm their inventory is tanking proper now (April 2026) however you’d be considering incorrect. In the event you had been fortunate sufficient to be holding $5k in Atlassian inventory pre-IPO and had bought it on the finish of the primary day’s buying and selling it might have netted you about $70k. In the event you’d held it till the height round October 2021 it might have been value nicely over $1 million.
- Alan Jones is a pitch coach, founder coach, and angel investor at M8 Ventures which operates the M8 Syndicate on the Aussie Angels platform.
