Are you involved in or thinking of making angel investments? I hope so for the entrepreneurs – we can’t have too many investors in this emerging ecosystem. Angel investing is not for the faint of heart and I fear that too many of you will approach your investing like you approached the company that you ran.
I know that your success in your company was based on a combination of smarts, hard work, timing and persistence. I know that you took full responsibility for the outcome of your company.
None of that will work as a successful angel investor!
Warren Buffett (The Oracle of Omaha) is known for his strict adherence to what others call value investing based on the principles of Ben Graham (his mentor). A quick primer: value investing’s mantra is to rigorously identify through analysis the intrinsic value of a company and the subsequent purchase of securities in that company where that intrinsic value far outweighs the purchase value of the same security. Some call it safe, some call it boring, and Buffett calls it smart.
The thing about angel investing is that it is impossible to “identify through analysis the intrinsic value of a company” like you might for a public stock.
A few weeks ago, I outlined 3 simple angel investing tips that align with a few Warren Buffett guidelines and will orient you to making better angel investments. So how would you try to align the “Oracle of Omaha” and his strategy for value investing with the challenge of making seed stage investments.
Check out the three principles that I liberally borrow directly from Warren Buffett’s approach. Apply these to your angel investment style and you may increase your ability to create a return.
Are you an entrepreneur? Knowing these investment principles can also help you outline how to craft your pitch to align with investors principles.