Startup Investing: The New Trend in Alternative Assets

By Tim Hoghten

By definition Angel Investors are individual investors. But the data shows a rapidly growing trend in accredited investors investing together. This is something that we have experience at 1000 Angels, the private investor network that connects startups with investors. So how are sophisticated investors putting their money to work today?

Trending Investment Strategies

Global investor surveys have shown that since the crises of the early 2000s more affluent and sophisticated investors are choosing to invest in partnership with each other. This is in contrast to going it alone in direct investments or publicly traded REITs and stocks.

Wikipedia notes that “in 1996 there were about 10 angel groups in the United States. There were over 200 as of 2006.” In a report on startup investing and “How the Rich Invest” Forbes notes that the Angel Capital Association counted more than 330 active angel groups in North America as of 2013. While the Wall Street Journal claims “very few start-ups” received angel investment in 2007, Stanford Graduate School of Business, Center for Entrepreneurial Studies proclaims “90% of all see and start-up capital” comes from angel investors. Just 2% of startup financing actually comes from venture capital firms. But angel financing has been evolving thanks to ‘Super Angels’ and crowdfunding.

How To Find Deals

Angels have organized themselves in a number of formats, including:

  • Pooling funds as hybrid super angel-venture capital funds

  • Geographically; by gravitating to startup hubs and fertile environments for new ventures such as Silicon Valley, New York, Austin, Miami, and even SW Florida.

  • By attending investor pitch events at coworking spaces, conferences, and even on TV

  • Local social gatherings providing angel financing to local entrepreneurs, like Miami Soup

  • Online via platforms like 1000 Angels

Five Reasons to consider Investing through Online platforms

  1. Safety

  2. Due Diligence

  3. Enhanced Investment Performance

  4. Deal Flow

  5. Fun

Participating in startup investing as part of an online platform adds in all of the factors which may be missing for investors. Groups investing in multiple deals mean better diversification. That means safety in investing. They also attract more deal flow than solo investors.

When investing with a group of likeminded and qualified accredited investors, due diligence burdens can be shared. This is especially true with today’s crowdfunding platforms which pre-screen and vet proposals. A savvy angel network invested on the ground floor significantly elevates the potential of a startup too. It means a base of invested individuals that may both provide additional cash injections without causing dilution, along with more introductions and ambassadors, all pushing to make the venture a success.

Let’s not forget fun. It can be lonely as an angel investor. Even if you are at the ‘top of the world’ by all other standards. You may not always want to travel or find you fit in with the other angels in your neighborhood. However, the buzz and camaraderie of investing alongside other angels online can prove to be both more profitable, and fun.

In Summary…

Online platforms are trending. They can add a substantial opportunity for investors, boost the odds of success, and lift ROI. There are plenty of options for participating, even if you live remotely or are a full time global traveler. Plus; investing with others just makes it more meaningful and enjoyable.

Try it out…