Set Good Targets
1.1 Personal Motivation for Angel Investing People have widely varying reasons for being an Angel, and it is vital to know your own. This personal-value-based approach will drive all your other investment decisions. Is it primarily about the money? working with interesting people and companies? making a contribution? socializing with other Angels? buying a job for yourself? There have been many academic studies of Angels’ motivations over the years (Morrissette). Sullivan & Miller were the first to show that a large number of Angels were willing to accept lower returns by essentially exchanging non-economic psychic or social rewards for financial ones. They classified them into three major types, depending on their primary motivation: 47% of Angels are economic investors who primarily want to maximize monetary wealth: • ROI is the most important • Highest ROI expectation (30% ROI expected vs only 21% ROI for non-economic investors) • Largest average investment size 31% of Angels also seek non-economic or psychic rewards: • Enjoy investing, like the entrepreneurial process and the fun of being involved in an exciting company. Enjoy the thrill of the ride! • Lowest ROI expectation (21% expected vs 30% for economic investor) • More likely to invest with a group • Skew slightly older 22% of Angels also have altruistic motivations and want to help entrepreneurs and/or society; sometimes called “pay-it-forward” reasons for investing: • See the value in supporting new business and/or socially beneficial products • Most patient investor, willing to hold for seven years or more • Smallest average investment size
20 A Practical Guide to Angel Investing
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