On July 21, 2016, we held another in our series of Hera Fund Wingpact Conversations with Angel Investors, featuring angel investor Amy Chang. Amy is a great example of the many new women angel investors we now have in the ecosystem who are actively bringing their passion, vision, and financial clout to building the future. This conversation was hosted by Silvia Mah, Founding Partner of Hera Fund, and Suzanne Andrews, Founding Partner of Wingpact.
Amy shared her experience working with angel groups and why she sees angel networks as a crucial resource.
When considering whether to join angel groups or work as a solo angel, it is important to think about deal flow, or the number of investment opportunities that you are exposed to on a regular basis. Angels typically need to look at 30 to 40 companies before finding one to invest in. One of the biggest advantages of angel groups is that they go a long way toward bringing you this level of deal flow, since groups attract a lot of companies and have systems to manage the volume and share the good deals with their members.
Amy has found that her involvement in angel groups also increases her deal flow informally. Often, companies come to Amy’s attention through the personal contacts she makes in groups, outside the formalized angel group process. Angel investors like to introduce companies to each other.
Another reason angel networks increase your deal flow is that they tend to use deal-tracking technologies like Gust, which give you access to investible companies all around the country.
Another great advantage of angel groups, besides deal flow, is the positive impact on the due diligence process, when angels investigate a promising company deeply in order to make a fully informed investment decision. Groups have a built-in pool of people to share the due diligence work with. Also, angel groups have access to due diligence reports done by other angel groups. This sharing of information makes the process more efficient for investors, and for entrepreneurs as well. Plus, you can draw on the skill sets of all the group members for evaluating the many aspects of companies. If you are a new investor, your access to the expertise of experienced angels is invaluable.
Angel groups that Amy is involved in in the San Diego area include Keiretsu Forum, Tech Coast Angels, and the Wharton Alumni Angel Network (which you do not have to be a Wharton graduate to join). Silvia is also connected with a variety of angel groups, including Hera Fund (which she founded), Golden Seeds, Pasadena Angels, and the Los Angeles Venture Association (LAVA). When you are a member of one angel group, you benefit from many groups, since they share deals with each other. For example, if Kieretsu is funding a company, and there is room in the round for more investors, they may pull in Tech Coast Angels, or Golden Seeds, or any other group they have connections to. Investors want their companies to be able to raise the entire round of funding they need to be successful, so angel groups are motivated to bring in other groups when more funds are needed.
With all of these great benefits, are there any disadvantages to joining angel groups? One consideration is that the groups are not inexpensive – it could cost thousands of dollars per year to join, depending on the group. Amy points out that this expenditure is worthwhile, especially considering how much money angel investors put to work, and the resources groups provide to help their members make better investment decisions.
Do angel groups promote a kind of groupthink, or herd mentality? It’s possible, but it’s also a positive to be in a group of like-minded individuals who are passionate about supporting innovation. You will definitely want to do your own thinking, while also benefitting from the expertise and camaraderie of others.
Some groups have recommended annual investment minimums. However, no group wants to push investors into deals they are not comfortable with.
In closing, Amy encouraged all women who have the necessary capital to explore angel investing. Even if you feel a lack of confidence, at least explore some of the many ways to learn. As angel investors, we all want to keep growing. Some of the ways Amy continually learns more are webinars and educational content from the Angel Capital Association (ACA), joining due diligence calls, and asking specific questions of friends. Amy and Silvia meet regularly for coffee to share ideas and knowledge, and to support each other.
You can watch the full discussion on angel groups with Amy Chang on Hera Labs’ YouTube channel.
If you found this article interesting, you will want to join us at the Hera Venture Summit, for women angels and entrepreneurs, Saturday September 17, at UC San Diego. We will listen to each other, learn from each other, and of course, network. As Sylvia says, “You never know who you will be sitting next to!”
Some pre-summit events to note are:
- Hera Fast Pitch – Wednesday August 31. The top 3 companies at this event will pitch at the Hera Venture Summit.
- Our next monthly Conversations With Angel Investors, featuring Christine Lim, Wingpact Founding Partner, leading a discussion on Investing in Emerging Economies, Thursday Aug 25, 4pm PST on Google Hangout.
We hope to see you at some of these events – join the conversation to advance the women’s startup ecosystem and connect women angels and women entrepreneurs!
Also posted on Wingpact’s blog, Soar Higher.