why I started angel investing.
It's time to start putting some money where my mouth is. So, I've decided to start angel investing. The aim is to test out an investment thesis and flex the muscles of being a decision-maker and check writer. Putting skin in the game and seeing how it goes. Being an investor is often challenging, because your feedback loops are long, about 10 years long, before you start to see the fruits of your labor.
And while I'm at it, I might as well do what you typically do at a fund. Write investment memos or briefs, build out a portfolio construction model, track investments and valuations over time, support fundraising efforts, and find a way to add value to the founders. I want to go EARLY, company formation early.
How am I doing this? I got proactive about meeting the SEC regulations for private investing and took my Series65. (more about that here.)
My placeholder fund name is Mary Ellen Pleasantly, an OG capitalist from the 19c who was arguably the first black woman self-made millionaire. She made her money as a cook, coming from the East Coast to the gold mines of the West and settling in the bachelor town of San Francisco. Her food was renowned and she would only work for the best businessmen in the city. To use insider information she gained from overhearing conversations to invest alongside them.
Her aim was to earn as much money as she was able to help as many people as she could. Aligned with my own financial goals.
Thesis
Investing in pre-seed healthcare solutions that address life's biggest transitions.
Criteria
- Gender diverse teams
- Obsessed founders
- Overlooked problems or presumed “niche” industries
Check size: $1K
Portfolio Construction Model
As with most models, this is probably total bs. But based on the latest and a touch of a "spray and play" model, there is some expected returns.
I'm primarily investing out of a self-directed IRA (more about what that is here) and am using alto as my provider, which integrates directly with pre-existing brokers from platforms such as Vanguard, Charles Schwab, etc.
IRA's were created in the 1970s in response to a decline in defined-benefit pension plans and has become one of the most popular ways to invest for retirement. Both traditional and Roth IRAs allow investors to put money into stocks, bonds, mutual funds, and other conventional assets, with the former providing tax-deductible contributions and the latter offering tax-free withdrawals.
Self-directed IRAs (SDIRAs) give investors access to a much wider range of alternative investments like real estate, precious metals, and venture capital that can provide IRA benefits like tax deferral and tax-free gains. Venture capital in particular, can be a good SDIRA option due to its longer investment timeframes and resilience during economic downturns compared to stocks and bonds. Over a third of venture investors use SDIRAs to diversify their retirement portfolios. More here.
Why am I doing this? What do I hope to gain? Experience.
VC is a 'years in' kind of industry, the more you see and the more you do the better investor you become. As I think about the type of investor I want to become, I don't only want other investors to have an influence on my working style and perspective. I also want to understand what founders need, and what better way to do that than working directly with them.
Stay tuned for more on this journey.