Behind the Checkbook: Inside an Angel Investor’s Brain

Working in the financial sector for many years, angel investing has been on my radar for quite some time. It always seemed intimidating and something you needed a lot of money to do. No one gave me an angel investing manual. My friend told me about his brother-in-law’s startup, Outcast Brands, a premium Irish spirits company, and I was hooked. After being asked to join the Outcast Brands steering committee, I decided to attend Yale’s Women on Boards executive education program to learn more about board service, which in turn gave me the confidence to dive deeper into angel investing.  

I love connecting people, and angel investing allows me to do that. Also, I’m the biggest cheerleader when I believe in someone or something, so it is a privilege to help people make their vision a reality.  

How Do I Decide to Invest in a Startup?    

It is imperative to me to invest in underrepresented founders and business plans, especially women, BIPOC, and members of the LGBTQ community. Additionally, I’m drawn to purpose-driven companies. Once those initial qualities are checked off, I go to my internal list.    

• Founder – Do I trust them? What is our chemistry? Do I like them? Do I think they can do what they say? Do they have experience, connections, and the absolute will to make their dreams come true? There’s not a formula for this – I have to trust my gut.    

• Need for the Company – The second thing I ask myself is: do I understand and truly see a need for the product or service an entrepreneur aims to provide? If I don’t understand it, I will not invest in it.  

• My Value – As angel investors, it is in our best interest for a company to succeed. I always think about bringing value to this endeavor through my connections or experience.     

• You Have to Know Your Numbers – At the angel stage, the financial figures are usually always projections, which is OK. I want to understand where the money raised will go – inventory, marketing, research, etc.  

Insider’s Tip: If there is a salary included for the founder without positive cash flow, I automatically say no. I want to see the founder contribute sweat equity and capital to get their dream off the ground.   

How Can Someone Pursue Angel Investing? 

Understand the Requirements – Before deep-diving into the angel investing pool, make sure you can or are on track to meet the qualifications.  

• Most times, you need to be an accredited investor (have $1MM in net worth, not including your primary residence, or have made more than $200K each year for the last two years), which can be a barrier to entry.
• As an angel investor, expect to contribute between $5,000 – $25,000

Education – Take a Class or Join an Angel Group. Here are some recommendations:

• Women 2.0 - A company focused on gender, diversity and inclusion in the tech and startup spaces. They serve over 300,000 people through content, programming, products and services and have been an industry leader in the space for almost 15 years.  The Angel Sessions will provide a forum to build skills, develop strategic relationships, and increase deal flow.   
• Angel Capital Association (ACA) – ACA, in partnership with leading organizations, has created the Rising Tide Education Program, helping new angels discover the basics of becoming an angel investor with this unique collection of educational resources. 
• 37 Angels Bootcamp – Participants immediately put the learning to practice by conducting diligence on a real startup (sourced from the 2500 37 Angels see each year) under the mentorship of their team and seasoned angel investors. 
• Pipeline Angels – Since Pipeline Angels launched in April 2011, over 450 members have graduated from the angel investing program and have invested more than US$7M in 90+ companies via our pitch summit process.  

Network – Talk to current angel investors utilizing LinkedIn, online webinars, or people in your community. Here are some groups:  

• Angel Investors and Entrepreneurs  
• Investor Collective | Impact Investors, Venture Philanthropy, Angel Investors, Social Entrepreneurs 
• Venture Capital and Angel Investing Network  

Bottom Line: Stay True to You    

Congratulations – welcome to the Angel Investing Community! Now before you invest in everything in sight, remember a few things:  

• Stick to Your North Star – Create and stick to  your thesis to weed out businesses/entrepreneurs that are not a fit for you.  
• Do Your Due Diligence on a Company and Entrepreneur – Talk to experts, utilize online search engines, check references. This is your money, people expect you to ask questions before writing a check.  
• Take a Second – Let an opportunity simmer for a day or two (or a week) before writing a check.  
• Be Clear – Communicate with the entrepreneur on where you stand and your concerns. It is OK to say “no,” but make sure to do so in a timely and transparent fashion.  
• Trust Your Gut – At the end of the day, angel investing is about supporting a passion. If something doesn’t feel right, then it is probably not the best option for you. There are always more startups in the sea.  

Katie Dunn is a New York City-based commercial real estate finance executive, board director, and investor with expertise in strategy, finance, risk management, audit, and asset management. Her investing portfolio includes Outcast Brands (Blood Monkey Gin), Snikke & Likkit, Conscious Good, Another Tomorrow, Vin Social, and Heirlume). Dunn is a long-time supporter of the Enthuse Foundation and goes out of her way to assist other women entrepreneurs including Rhonda Cammon of Perfectly Cordial. Cammon was a finalist at the 2020 Enthuse Foundation Pitch Competition for Women Founders. After her presentation, Dunn was able to connect with Cammon and suggest partnership opportunities with other businesses in her network. Dunn continues to advise Cammon and hopes to be an investor in the future. Connect with Dunn on LinkedIn.