Do Good While Doing Well

Job Creation

One of my reasons for starting and continuing to be an angel investor is to contribute to job creation—jobs that people enjoy and allow them to contribute to making the world a better place. While we don’t have a lot of data around how many jobs are created because of angel investors, Desert Angels, an angel group in Tucson, Arizona, did a study over a ten-year period showing the economic contribution the investors made. Collectively they invested $47.3 million in ninety-five different companies. The study concluded that “for every $100,000 of investment, these portfolio companies produce 5.8 direct jobs, $458,000 in wages and $2.1 million in economic output.” If we do the math, this one angel group over ten years contributed roughly $1 billion to the local economy. This is a real-life example of the old adage about giving someone a fish and feeding them for a day or teaching them to fish and feeding them for a lifetime. This is like creating an entire fishing conglomerate!

At one point, I tried to add up how many jobs got created from the companies I was invested in. It was hard to measure an exact number, but conservatively, I contributed to hundreds if not thousands of jobs being created. I might have been a tiny percent of a percent of the investments into those companies, but I still played a role.

Networking

I had no idea how many people from different industries I would meet as an angel. I have met people through local meetings, larger events, and collaborative decision-making about investing in a start-up. Having a shared goal of deciding to invest in a company is an interesting way to get to know people. You analyze and strategize about the company, the team, the product, or service; who would pay for it; and how much the company could grow, just to name a few. These types of conversations allow you to get to know someone pretty well after just a few weeks. And you work in groups, so no part of the work or decision is left to just one person. Plus, angels get to network with entrepreneurs and all the other investors that invest in a company. I am a co-investor in a company with Mark Cuban. I’ve co-invested alongside big venture capital firms and other strategic companies like Constellation Brands. I knew of an angel group that was started because the leader of that group was friends with a professional football player. She started an angel group for professional athletes, giving her access to a whole new world of people. While there are stories of angels getting to interact with celebrities, which can be interesting, every angel makes new friends and builds relationships with like-minded people each time they look at a new company for investment.

The network effect also comes when entrepreneurs become serial entrepreneurs after doing well their first time, and they go on to build more companies. If you are an investor at the beginning, you are usually allowed to participate in their later companies, which may be closed off to other investors.

Some people end up becoming angel investors because of their network. Here are a few random examples. A local investor, Quinn, had a sister, Stella, who started a business and was raising what is called a “friends and family” round. This is the very first money raised by a new company. Since Stella knew the founder, she could invest, and likely several other family members and friends would too.

Having a network whose members have attained a certain level of expertise is another way angels get introduced to start-ups. Will is a doctor in gastroenterology, and a company made a product to help doctors during a colonoscopy procedure. Since angels like solving big problems and Will knows firsthand how much this new product could help, he decides to be an investor and back the company.