How do angel investors decide where to put money?

“So it's like whether you see yourself as an investor or not, you are an investor. You have savings, they are in a fund, that money is being invested. Like, you can choose to ignore that completely, or you can choose to engage with that and either decide— like, at the minimum, you can decide where that money goes in terms of, like— and even, like, different types of— like, I know you can choose different types of funds within— like, AustralianSuper has different ways you can— like, different super funds you can put your money into. So, like, at a very minimum, every person in Australia is an investor in that sense. And like, once you kind of get to understand that, then you can go, well, I could put more money in my super, or like this next batch of savings that I'm going to make, I could allocate it to an ETF, or I could put some of it towards angel investing. And recognizing that like, you're kind of like, super is kind of like the gateway drug here that like, once you understand that you're an investor based on super, then you can start to look at other ways that you can engage like investment asset classes.”

“Yeah, I think one of the things that felt really confusing to me when I first started was this idea of like, how do I actually write a check? And like, do I just hand the founder cash in a baggie? Like, what, how does this actually happen? And like, it's one of those things where like, you just don't know until you actually do it. And when you are doing it, you're not sure if you're doing it the right way because you don't, you never get told. So, What I wish I knew at the start was like, there are different ways to write checks to startups. One is you can literally like just talk to a founder and decide, hey, I'm going to give you money and I'm going to wire you money to your like company account. And you're going to give me a piece of paper that says I own some shares in your company. And that's all it is. I kind of, I'm not sure what I thought or what I was expecting, but like that process just sometimes it like I think at the start it felt too easy. It was like, are you sure? I just, I just send you money and you give me this piece of paper. But then the other way is like you can go through syndicates and in that way, in rather than like having that direct relationship with the founder, you kind of rely on somebody who's done it before. And rather than sending the founder directly money, you send like the syndicate lead or whatever platform they're using, you send them the money and they deploy it to the startup. So there's a little bit more structure involved there. And then the other way is like, you can just, if you really wanna get into early stage investing, maybe not necessarily like be an angel investor right away, but kind of learn, um, a little bit along the way, you can just like write a check to a fund and say, all right, you distribute my money into this early stage space. So I kind of think of them as like 3 buckets. You can go direct, you can invest through a syndicate, which is kind of this like happy medium in my view between the fund and direct. Um, or you can just go with a fund and have a fund invest your money.”

“I mean, you've hit the main ones, right? You have to be on the field at all times, especially at early stage. A big part of performance is participating in the right vintages.. And so you want to make sure that you are not illiquid in a period of time when it's really important to be liquid. Also, as an angel investor, you know, there's a nuance here, right? As a fund manager, we have to be liquid because it's our job. And so cash planning and making sure that we don't run out of money is really important. But as an angel investor, you know, depending on why you're doing it, that can change. For some people, they're deploying for kind of impact reasons, or they're deploying for learning reasons. And so for those folks, like, you run out of money, no biggie. That was not the goal, right? But from an investment performance perspective, it's really important that you're consistently investing across vintages and have a kind of consistent cadence at which you are deploying. So I think really important. The other thing, as you said, is, you know, if you miss the outliers because you are liquid in that period and/or you're only investing in the top of the cycle, you can imagine that that doesn't drive to, you know, pretty solid long-term returns. And so you need to make sure that that's the case.”