Why am I an angel investor?
Well, for starters I have been very fortunate in my life to come from a family of entrepreneurs who deeply understood that the blessings of our way of life depend on our thriving free enterprise system.
So, from an early age, at the top of my respect pyramid were those that created wealth via their own hard work, creativity, and opportunistic sense of risk and reward.
Or, more simply, the entrepreneurs, the owner-operators, “the risk takers, the doers, the makers of things.”
Those brave souls that embody Picasso's famous credo of "work
being the ultimate seduction.”
From whom business is far more than simply a way to make a living.
AND as they do it, they make money.
A lot of it.
In fact, the vast majority of these smaller companies earn a far higher return on capital than their larger publicly-traded brethren.
In fact, companies on the Inc. 5000 - a list of the country’s fastest-growing privately-held companies - average annual revenue growth of over 70%
And a good number of these companies take in outside equity investment, primarily to accelerate their growth.
Some from professional investors - private equity and venture capital firms - and some from individual, “angel” investors.
And when the better among them do, I take a look. Here’s why:1. High Rate of Expected Return
. Angel investing is by far the highest expected rate of return form of investing, Research from the Kauffman Foundation Angel Returns Study
and the Nesta Angel Investing
study, compiled by Robert Wiltbank
, have demonstrated that the "...average angel investor (across the U.S. and UK) produced a gross multiple of 2.5 times their investment, in a mean time of about four years."2. Home Run Potential
. Smaller operating companies are the only form of investment that offers true "home run" potential.
Almost all great fortunes have been made via positions in small companies that became big. The list is legion, and runs from Standard Oil, DuPont, and Ford, through IBM, Hewlett-Packard, Wal-mart, Microsoft, and Oracle, to modern day supernovae like Amazon, Google, LinkedIN, Facebook, and Twitter. 3. Connectedness
. Perhaps my favorite, investing in smaller, private companies offers a connectedness, realness, and "human scale" interaction best compared to philanthropy.
It is the spiritual opposite of index, derivative, and Federal Reserve tea leave gazing that so unfortunately is what the media now considers “finance.”
Quite simply, angel investing is one of the last, pure forms of doing good while doing well…
…making a high personal expected, economic return decision while
contributing to the entrepreneurial force of the world and providing fuel for innovations of all types that make it a better place.
What is better than that?