Angel investing, when done well, involves commitment to founders, thoughtful strategic advice, and often significant purpose. It is not a hobby.
When I search for the word hobby, this comes up: “an activity done regularly in one’s leisure time for pleasure.” Reading novels is a hobby. Playing an instrument for fun is a great hobby. Jogging can even be a hobby.
Angel investing should not be. Founders are taking huge risks to get their startups off the ground and have real life issues to worry about (ie. making payroll at the end of the month). Investors should treat investing behind them as a responsibility, not a hobby.
Here are some things that good angel investors do for startups:
- Get emotionally involved in startups
- Treat founders as peers, rather than act like parents or babysitters
- Give direct, honest feedback, and importantly, don’t always expect the founder to do what they say
- Actively look for commercial contacts and potential investors
- Promote good corporate governance by looking out of the best interest of the startup
They investors are emotionally, not just financially, involved in the startups they invest in and are available to the founders they back. It is an investment of time and money. They wake up early, stay late to meet with founders and respond to founder emails on the weekends.
Great examples in Lima’s startup ecosystem:
A few investors in Peru that meet this profile that I have invested alongside with, or sat on board meeting with, are: Ernesto Balarezo, Harold Marcenaro, Jose Garcia Herz, and Lucho Torres. Ernesto Balarezo is an investor in Comunal Coworking and actively involved in both scouting for talent and executing on Comunal’s regional expansion plan. I have seen him sit through strategy sessions with with the Comunal founders and, rather than tell them what to do, act as a supportive counselor. Lucho Torres, a pioneer angel investor in the Peru ecosystem, has invested in many startups and is also founder of Angel Ventures Peru. I like that he adds the list of startups in which he has invested to his Linkedin profile. This is a good practice to both promote transparency on his end and provide exposure to the startups.
These and other angel investors apply years of experience as both managers and investors to the startups they back. They are available on weekends and outside (or sometimes during) regular business hours. They are demanding, but they care. These top investors care about founders and the success of the startups they invest in.
We are at the point in the Peru startup community where founders can start to be picky about their investors. There is a new separation between angel investors and hobby investors. Next time you are looking for capital, ask for intros to investors from fellow founders, or ask potential investors to provide contacts of the founders they have backed. This will help hold investors accountable and result in more and better angel investors in Peru.