How to multiply your net worth as an angel investor
Let’s say you’ve made an exit.
A good one. Now you have some money to invest and to live off. You start investing in startups and living the life you’ve dreamed of for decades. You’re a business angel now.
Over the next few years, you look at your bank statement and watch the number there slowly go down.
At first, it’s ok.
There’s still plenty of money, and you’ve made some pretty solid investments. But a few years into this journey, some of the investments turn out to be not that solid after all. And you still live off that money you have in the bank. You like the lifestyle it allows you to maintain.
The only thing you don’t like is that you know the exact date you’re going to run out of money. And it’s not that far away. Not that you have to panic. But still, it makes you worry.
At first, you have 10 years to hit the jackpot. Then 7... 5...
Should you continue to invest and hope for a big payday, or is it time to get back to work, to start your own thing?
But if you get back to running your own business instead of investing, will it still be that lifestyle you’ve learned to like so much?
A business angel has a limited runway. Just like a startup. And just like a startup, before scaling, you need to make sure your business model works.
At least make sure you know how not to invest in some complete trash:
Do not invest in startups that don’t create lots and lots of value for their customers or don’t know exactly what this value is.
Do not invest in startups that don’t care for their unit economics.
If you’ve invested in someone who cares for their value and economics, help them identify their main limitation on the way to growth, focus on it, and quickly test hypotheses to overcome it.