Investing in Startups – Pitching Is Personal

Pitching is personal. We can crunch the numbers, scrutinize résumés, and ask the difficult financial questions, but at the end of the day, decisions will be made on intangibles—gut responses and feelings that move founders to create and pitch and angels to act.

Why are these emotional intangibles center stage?

Consider for a moment how risky angel investing really is. It’s highly illiquid. Your money can be parked in the investment for a long time, possibly eight to ten years. That’s a long stretch to wait to see the fruits of your labor. You need to do a ton of research on each and every investment you make, and the startups you look at often have little or no financial history—only projections into an uncertain future.

If it’s so risky, why keep doing it? “Because it’s addictive,” says Ross Blankenship, an angel investor and startup coach. “It’s enrapturing to see a company that was valued at $2 million and then it becomes a public company, now worth $4 billion. I mean, just from a financial standpoint, that’s awesome.” Success at angel investing means discovering a personal growth curve that starts with a combination of instinct and clear-minded evaluation of metrics and continues into an expansion that allows the angel to move beyond their own biases and opinions.

Angels are emotionally rewarded when startups grow

Angels are deeply and emotionally rewarded by seeing startups grow from the seed of an idea and progress through “the fighting in the dirt, the sand battles they have as a little kid,” as Blankenship described it, to grow into real companies. It can be exhilarating to walk alongside founders as their ideas grow slowly but surely. The intangible hunches that led to an investor taking a risk on an early-stage company lead to a tangible outcome with people, product, process, traction, and financials.

When all those elements come together, it’s the most difficult achievement an entrepreneur can attain: Participate in the process of building the germ of idea all the way into a successful company. We know that not every investment has that happy ending, even most of them don’t, but what always happens in the process is a growth curve for both angel and founder.

This is an excerpt from my book The Angel Playbook: An Essential Guide for Entrepreneurs and Angel Investors.

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Also published on Medium.