You Can Start Your Own Angel Venture Fund

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Seed money
Seed money
Seed money

If you are all excited about the market valuation of Facebook and Twitter, don’t worry. There is still a lot of demand for angel investing. In fact, angel funds will never go out of style. Entrepreneurs starting up companies are always in need of angel funding. In fact, your problem is not a lack of choice, but too much choice. There are so many ideas floating around in Silicon Valley that needs funding, that it is really hard to make heads or tails of it all. If you want to make money with an IPO, a private placement, or secondary investment placements, here are some tips that will help you start your own angel venture fund.

Sophisticated Investors

It is really important that, when starting your fund, you focus on sophisticated investors. These are Americans who are worth more than $10 million. Don’t waste your time on small fry. Individuals who are worth less than $10 million are more likely to sue you. They are the ones who expect your fund to invest only in home runs. You know full well that this is impossible.

So avoid the headache of going after doctors and lawyers who are worth less than $10 million. Instead, look for individuals who are worth more than $10 million and are liquid. This means that their net worth is not tied up to their home but to actual liquid assets like stocks, bonds, and intellectual property.

Proper SEC Filings

It is extremely important that, when starting your angel venture fund, you comply with SEC filings. The good news is that, once you focus on sophisticated investors, there are a lot of safe harbor provisions in the U.S. tax code that can protect you. There are also safe harbor provisions in the U.S. corporations code that can protect you. Be aware of these provisions. Make sure that all your filings for private memoranda and other private investment placements fall strictly within both federal and state guidelines.

Success Is All About Probabilities

At this stage, your focus on investing isn’t about all your investments being home runs. Let’s get real here. Even the biggest investment houses in the United States like Goldman Sachs, or venture funds like Andreessen Horowitz, don’t always hit a home run. In fact, their batting average is around 20%. The good news is that even if you blow a few million dollars in duds, if you invest in one Facebook or one Twitter, you make all that money back and more. It is all a numbers game. The key is to diversify your angel and venture funds to maximize your chances of success.

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