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Edited from preface of angel investment, author: Victor Tong, all rights reserved
My reason for angel investment is quite simple.
Firstly, IDG helped me before, so I think it is my responsibility to help others, hence pass down the knowledge and experience, with the money I made at the time selling my company.
Secondly, I believe I am good at making investment decision, but my experience in IDG divulge my weakness in analyzing balance sheet and financial model, so I focus on early stage of start-ups. I did successfully raise a company from 5 people to 150 people, so angel-investment is perfect for me and highly leveraged my previous experience.
Thirdly, helping others in early stage fulfils my vanity and sense of achievement, I will feel extremely good about making a company successful, no matter I am making less money than VC/PE or not.
I concluded four traps of angel investment: 1. Friendship/face investment. Your good friends drop by and ask for it, Chinese would be easier to invest because of friendship or face, even the project is a piece of shit. 2. Blindly follow. Invest in a project, not because you know it well, but other investors talk you into it. 3. Familiarity. Like Warren Buffet, he only put money in the company/industry/management he’s familiar with. 4. Greed and impatient. Don’t rush throwing money out, hold it and wait for the big chance.
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