We often hear that it has never been more affordable to create a digital database company. It is also often claimed, that there has never been so much money available in the market for investments. If you have these two factors put together, it would seem that investing is just a matter of following the impulse of the moment. However, it is not. Investing in startups requires the angel investor to use a methodology of a virtuous circle between the entrepreneurial team and the investor, in which together they can reach the next level in the company’s growth. A good way to start the journey as an investor is to detect early stage capital funds such as NXTP Labs or 500Startups to have a big enough tank with a sufficient number of fishes to catch and then be able to do what we call “cherry picking “, selecting the portfolios of the best companies . Cherry picking is the method which reduces the amount of time invested in the investigation of actions and entrepreneurial teams. For example, if the angel investor is interested in placing money in e -learning, instead of doing the scouting by his own, researching projects about this market, he should look for a new fund, or an accelerator, which already has several e-learning companies in its portfolio. That’s how you invest in the best performers. In other words, select the cherries of the cake. This guarantees the investor on saving effort in the task of finding entrepreneurs. The scouting is an overwhelming task for those who are eager to find investment opportunities. Being an angel investor goes beyond having capital, it has to do with a process of knowledge that both the startup and the investor build together. To choose an early stage company, the investor should know that he can add value that goes beyond the capital located, it will be important to understand the industry in which the entrepreneurial team ventures. Identifying trends and learning how to to ride the wave of investment correctly, has to do with an accurate reading of the present moment and the chances of success. That will greatly set apart the quality of the investment, even though we are talking about the location of capital, money is not everything when it comes to impact. In my life as an entrepreneur and an investor I have seen contrasting cases. On one hand, investor who prepare themselves to understand a period of time and market, recognizing the profile the entrepreneurial team must have to add value to an industry, and other investors, victims of the Archer effect, who decide to put several thousand dollars on a startup which mean little or nothing to them, but do it because others are doing so. A very practical way to make the matching between investors and entrepreneurs is usually done at NXTP Labs, encouraging the link between entrepreneurial teams and mentors that can potentially be investors of the company. This is a very effective way to meet the entrepreneurial team and refine joint working. Beside joining an early fund and mentoring an entrepreneur team to scout or hunt for startups it’s important to attend national and international events organized by well-known institutions to entrepreneurs and investors, such as Endeavor, or nonprofit organizations that are linked to the development of the entrepreneurial ecosystem. At this point you must be aware that even though entrepreneurs are seeking for capital to help them reach the next level of their business, it is investors that are in search of the opportunity. A good entrepreneur team chooses its investment, and whether they get the money or not, they are determined to pursue their growth, so it is important to be in the “loop” of entrepreneurial teams. To be a good angel investor you need to be close to the market, the ecosystem, and have a method of tracking trends in the market where value can be added.
How to find startups to invest?