• Once you have a sufficient number of first round investments, Matt found, the best next strategy is to focus on follow-on investments. • That said, he maintains that trying to manage any more than 40 investments is impossible without professional management. So working with other Angels, Angel groups and Angel funds makes a lot of sense. There is significant demand by Angels to gain portfolio diversification and risk reduction by investing in an Angel fund. This is a fast-moving investment category that has really taken off since publishing the first edition of this guidebook, so this section is completely new for the second edition. In an Angel fund, Angels pool their capital and invest in a fund that makes investment decisions. An Angel sidecar fund is similar, but instead of making its own investment decisions, it co-invests alongside other Angels when certain trigger conditions are met (such as at least five Angels from the group making an investment of over $500,000). An accessible venture capital fund is similar to an Angel fund (and might call itself an Angel fund), except that the fund is professionally managed (usually by a former VC firm) in return for a fee. The professional management team acts as the General Partner (GP) and all investors are Limited Partners (LPs) with no liability other than the loss of their original investment. According to Steven Forth of VANTEC: “I get very heavily involved in a small number of companies where I am lead investor and sit on the board. So to diversify risk and increase the number of companies in my portfolio, I augment this by also investing in an Angel fund.” There are many differences among the various Angel funds, so a few examples will help provide you with the basics in finding one that might be a fit for you.
44 A Practical Guide to Angel Investing
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