This excerpt is serialized from a whitepaper titled Angel Investing for Single Family Offices by The Family Office Association. For a complete copy, visit the FOA website.
I am often asked by other SFO’s about how to best spend time developing an angel portfolio. Reality is, they can be amazing time wasters. Once an SFO has developed its angel investment criteria, determining a source for deal flow that matches those objectives is next.
And that’s where the time thing comes into effect. There are three basic options: EIR, angel networks or a small club of trusted peers.
Creating your own deals by sponsoring an incubator and hiring an EIR (Entrepreneur in Residence) to manage it is a strategy well-covered by Gabriel Baldinucci in a prior white paper published with Family Office Association. The basic advantages of this strategy are a relatively larger piece of the pie and outright control of the venture and its development. The drawbacks are the capital commitment of hiring an EIR and the capital to sponsor one deal from cradle to exit. Not to mention the time it takes to incubate a company!
Early stage investments take time, and lots of them fail. Just because you have capital to delay the mortality date does not mean the thing is a success. May SFO’s and angels value freedom as much as they value money: if you are one, this likely isn’t a match. Likewise, I am not a fan of angel networks, but htat’s another post for another time. One way to save time and gain some exposure to angel investing is through a small group of trusted peers. For more on how to do that, download a copy of the entire white paper, at the the FOA website.