We are living in a wealth obsessed world. Everyone is in it to try and make themselves financially setup. Although there are many other aspects of life that is more important than money, money is like oxygen. If you have it, it might not make you happy, but if you don’t have it, it’s like drowning. So why not at least try to relieve that stress? Maybe you’ve heard of investing in startups from a extended relative who struck it rich from a seemingly random investment, an acquaintance who raised a bunch of money for what seems at best, a copycat product and company, or that news article about how if you invested in apple, amazon, netflix, google, or other tech company, you would be sitting on a small fortune now. Most likely, you’re curious but have some doubts that make you hesitant to get started. Let’s look at some possible questions and address those concerns right now.

Concern: angel investing into startups has no liquidity at all

Yes, angel investing is essentially illiquid as you will have to hold onto an investment for 5–10 years, assuming the company is able to return anything at all. Unless you could find a private buyer ahead of time, an acquisition occurring, or an IPO, a sale to get funds would not be possible. So don’t invest more than you could afford, as retrieval of funds would be futile. But, this is actually an advantage, rather than a disadvantage. Imagine you did end up buying into the next big company, but, because you had some other financial concerns in life come up, such as paying off student loans, missing some savings toward a mortgage, you then end up selling a chunk if not all of your portion of said company. But then, the company after several years debuts on the stock market, and you realized you missed out on hundreds of thousands or even millions had you not sold. By not allowing a sale, it actually allows you to realize the maximum possible return (and loss). Behavioral finance actually indicates that humans on average are risk averse when in situations with a possible gain. If the average person is offered $100 guaranteed, or 50% chance of winning $200 or 50% chance of $0, most people would take the $100. With that mindset, it would lead to a likely sale of any startup the moment any kind of gain occurred. Take a look at the greatest fortunes never made from selling too early on the stock market, because of maximum liquidity. Perhaps the greatest investor of all time, Warren Buffett’s Berkshire Hathaway has gained 20% per year, over 50 years. FIFTY YEARS. There are countless stories of those who would have become millionaires and multi-millionaires had they held onto those shares for 10–20 years, at any time during the last 50 years. So let that sink in. Sometimes, not having the ability to do something looks like a curse, but turns out to be the blessing in disguise.

Concern: I am not living where the next big companies are likely to emerge and don’t have the access to the best deal flow

It’s true that you may end up missing out on some companies due to not being in the right place. 50% of the worlds world’s unicorn startups, or companies having reached 1 billion or greater valuation, come from the United States. And half of that, 25% total, come from Silicon Valley. However, given one of society’s recent great innovations, the internet is a force equalizer that allows you to filter for startups that come from Silicon Valley. If you wanted to, you could look online from the various equity crowdfunding sites for only companies coming from Silicon Valley. That gives you a large pool of startups to consider, besides just your local cities.

Concern: no without an active price, for example like the stock market, I don’t know where I’m at

Not having an active stock price given to you daily is actually the best part. Think of the home you are looking to live in or that you currently live in. Would you ask a realtor everyday to get you a quote for the price of the home? No one ever does that. Think of investing in startups the same way. This actually gives you emotional comfort, since you won’t be having your emotions follow the directions of the market. Rather than staring at your phone all day at ticker prices of your startups, which the average person spends now 6 hours a day on the phone, you can get emotional detachment and get on with your life. If you are relying on the angel investments primarily and are that concerned, then you probably shouldn’t be angel investing. Funds that are surplus that you aren’t focused on is what should be put in, not everything you have.

Concern: Startup investing is really a part-time basis activity

That’s the best part, that it’s part-time. Once you’ve looked at the company, the product, product market fit, and the founder, and decided to put some money into it, there isn’t anything left to do. Other than occasionally receiving updates from the founders, you can then do other things with your time. A stress free life is a good life.

Disclaimer

This is not Financial Advice. This article is only for educational purposes.