Thoughts on <my first Angel Investment>

Having just completed my first personal angel investment I wanted to share with you my thought process as well as a resource for future due diligence.

Thoughts on my first Angel Investment on Jonathan Mills Patrick dot com
I made my first independent angel investment today. Here is how I evaluated the opportunity

I absolutely love investing. I suppose it is the strategic work that goes into being an investor. Thinking about how that aligns with my personality, it makes sense that I would enjoy the activity. If you are investing properly then you are thinking of investing a lot like a chess game, meaning you are thinking multiple moves ahead. If rates go up what will happen to this stock? Who is the next CEO and how would that change affect the value of the company? Even if the current one isn’t planning on retiring anytime soon. Those are just a few examples of how you have to think multiple moves ahead as an investor. Those principles apply to angel investing as well.

I’ve had the opportunity to invest in my own companies, do due diligence on investment opportunities for other companies, and invest in companies through a family fund. But, until recently, I had yet to invest in a startup directly with my own money.

I had been thinking more and more about doing some personal angel investing. For a variety of reasons, including that I love the process of trying to pick “winners” and to diversify my own investment portfolio. Picking winners makes it sound like a gamble. And to some degree, any investment decision is a bit of a gamble. But, if you know how to perform due diligence on a company as I’ve done in the past, then you can eliminate some of the investment risks.

When this recent opportunity presented itself I was immediately interested. Let me walk you through why this startup would be my first personal angel investing activity.


Reason #1 - I knew the industry really well

Most investors stick to industries they understand. For the most part, I have done the same. If you are investing in spaces where you lack expertise or knowledge then the amount of risk you are taking is higher. It is a more speculative investment.

I know the industry and market that this startup is playing in very, very well. As a former C-level banking executive and advisory board member to one of the largest credit bureaus in the U.S., I’ve had a lot of exposure to the alternative credit scoring field.

Reason #2 - I’ve built my own solution in this market

One of my early startups was in the small-to-medium business (SMB) lending space. The product was built on top of a proprietary algorithm that I developed. That algorithm leveraged alternative data to decide equipment leasing loans.

Reason #3 - the company has built up some solid traction

Although the company is early-stage, the founders have been able to gain some significant traction. Including signing two strategic partnerships with really key distribution partners.

Reason #4 - the team

I don’t know the founders personally. But, having done some research about their experience I feel good about their ability to lead the business to success. One founder has had multiple startup exits and the other has just as much experience in the industry as I do. To me, that means they shouldn’t struggle with what the pain point is that they need to solve.

Reason #5 - the valuation

The company is raising $1M at a $12M valuation. Based on my research this is a very reasonable valuation. Especially for a company that has landed two key strategic distribution partners. That valuation also means there is a lot of upside for my investment. If the company hits a $120M valuation by the time of their Series B round then I will have 10x my money.

Reason #6 - low entry cost

The way this startup is structuring their round meant that I could invest in a level that is no different than when I am buying individual stocks. That means I have little downside risk in terms of money I could lose but a great upside.

Reason #7 - intel gathering

Since I continue to think about building out my own startup in this area of the market, participating as an investor in this particular company will lend me further insight into the market, what investors in this space are looking for, etc.

Reason #8 - the experience

It is one thing to perform investment due diligence on a company and/or invest money in another business when the money you are investing isn’t your own. It is a whole other thing to put your own money at risk. I look at this investment as nothing more than a learning experience as I will get even more exposure to the angel investing/startup process. I’ve already learned a ton.


To the point of #8, I realized during my research that I didn’t have my own well-defined process of how I would evaluate a startup for potential investment. So, I decided to formalize that process.

To help out, I reached out to a Slack group I am part of to see if anyone had an angel investing due diligence template they felt good about. No one had a good resource to share.

So, I built my own.

If you’ve thought about doing some of your own angel investing and are looking for a template that can guide your research and due diligence, as well as help you track your decision successes and failures, take a look at this resource I put together.


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