Angel investing without investing

Angel investing is—for most people—a bad investment. As such, accreditation is rarely the limiting factor to being able to realize outsized investment returns, because variance is incredibly high while median performance is tepid. However, it can have very net positive externalities that include networking opportunities, learning about venture, getting involved in exciting companies, and honing your startup skillset.

If you’re interested in angel investing, but don’t yet have a portfolio large enough to support diversified meaningful bets, there’s a few options to start down this path and capture a lot of the value you’re after.

If the investment side is most interesting, accreditation is the blocker, and you have a decent network of founders, I’ve seen two paths. Your goal should be to hone your decision making and analysis. Think about new trends and find companies who may be able to capitalize on shifting demands, new technologies, or business needs.

Then, share your thoughts with others. I’ve seen several people successfully launch venture investing careers by:

• Writing. Share your analysis of venture-backed companies. Publish “fantasy portfolios”, with your thought process. This is proof-of-work for your capabilities, and can lead to venture analyst opportunities.
• Running syndicates. If you have a strong existing network, especially if you’ve worked with founders before, consider starting investing syndicates. You’ll be able to dabble in finding investors, sourcing deals, and pitching companies, and can scale as large or small as you wish. It can be a lot of cat herding, but also a lot of fun.

If instead you want to be involved and helpful directly with early startups, your path is actually easier. There are many early stage companies with tiny teams that have needs, such as non-technical founders who could use technical direction or engineering founders who could use marketing or operations help.

Find and join startup communities. If you’re experienced and considering your next thing, I highly recommend On Deck to find other like-minded founders and people who you can help.

Your goal should be to hone your skills and build as much career karma as possible. This could include helping early stage startups build early no-code prototypes, to providing product feedback, to brainstorming go to market strategies, or connecting founders to other useful people.

Anecdotally, some of the most helpful people to Levels have either not had the capital to invest directly, or written very small checks. They’ve made helpful introductions, provided product feedback, and helped us think about our strategy.

From here, there is a clear path to advising early stage startups in exchange for equity. In fact, many times founders will offer advisor equity to be able to continue to benefit from your help.

So, if you want to start angel investing yet don’t yet have sufficient capital, don’t let that keep you from getting involved in the startup ecosystem. By using your existing skills and interests, there’s ways you can build a brand for yourself, learn more about venture (from both sides of the table), and help early stage companies.

If you decide to begin angel investing, I highly recommend Angel Investing: Start to Finish by Joe Wallin and Pete Baltaxe. This is the single best guide on the ins-and-outs of early stage venture and how to effectively do due diligence.