Interested in backing an entrepreneur and being part of a groundbreaking idea? Angel investing is the way to go.
Recently, many of you have asked, “How do I become an angel investor?” We decided to address this topic in today’s episode.
An angel investor provides funds to small startups or entrepreneurs. Investment amounts vary, and sometimes investors gain an ownership stake, while other times they simply expect a return on their investment as the business grows. Angel investors can also be known as private investors, seed investors, or angel funders. Regardless of the title, they can significantly impact entrepreneurs’ journeys while potentially earning substantial returns.
This week, we’re joined by Brianna McDonald, President of the Global Investment Network Keiretsu Forum, which has invested $750 million in over 1,000 companies since its inception in 2000.
Join us as Brianna offers a crash course on angel investing, explaining how it contrasts with crowdfunding and venture capital. We’ll also clarify what being an “accredited investor” means and the various paths to angel investing. Previously, to qualify as an accredited angel investor, individuals needed to earn $250,000 annually. That requirement has changed; now, if you can demonstrate investing skills or relevant expertise, you can qualify.
Brianna discusses how angel investors can achieve favorable returns and why this is an excellent time for women to enter the field. She shares her investment journey, how to locate angel investing groups nationwide, and the critical nature of research.
“The first step is defining your investment thesis. What do you want to support?” Brianna states. “For me, as a mother of three young children, I’m passionate about advancing technology that benefits society.”
Brianna outlines the process of becoming an angel investor, highlighting common pitfalls. She recommends observing the angel investing process and engaging in incubator environments for six months to a year before making your first investment. It’s essential to inquire about a company’s capitalization plan and their fundraising goals. When communication with a company ceases, it’s often a sign of trouble.
Transcript
Brianna McDonald: (00:02)
The first step is defining your investment thesis. What do you want to support? As a mother, I aim to advance technology for a better world, which is exciting.
Jean Chatzky: (00:23)
Our show is supported by Fidelity Investments. Each of us has unique financial needs and goals. Fidelity offers investment advice to help you achieve yours.
Jean Chatzky: (00:56)
Hello, everyone! I’m Jean Chatzky, and I’m thrilled to discuss angel investing, as inspired by our listeners’ requests.
Jean Chatzky: (03:08)
Brianna, welcome to the show!
Brianna McDonald: (03:10)
Thanks for having me, Jean.
Jean Chatzky: (04:18)
Can you explain what an angel investor is and how it differs from venture capital or crowdfunding?
Brianna McDonald: (04:22)
Angel investing involves using your own money to support early-stage private companies, while venture capital is more passive, managed by a fund with multiple investors.
Jean Chatzky: (05:01)
What steps should someone take to become an angel investor?
Brianna McDonald: (05:14)
To become an angel investor, first, understand SEC regulations for accredited investors. You need to meet income or asset requirements, or have relevant expertise.
Jean Chatzky: (07:03)
So, you don’t need a high income or vast assets as long as you possess the know-how?
Brianna McDonald: (07:10)
Correct! This recent change opens doors for many potential investors.
Brianna McDonald: (08:41)
I started investing at 26 while selling real estate, and my husband invited me to join an investment meeting. I initially felt out of place but learned valuable lessons.
Jean Chatzky: (09:26)
What is Keiretsu Forum?
Brianna McDonald: (09:48)
It’s the largest active angel investment network globally, with over 3000 members and multiple chapters.
Jean Chatzky: (10:22)
Is it like Shark Tank but without the theatrics?
Brianna McDonald: (10:35)
Yes! It’s about uplifting entrepreneurs, providing guidance, and fostering growth.
Jean Chatzky: (12:18)
How can someone find an angel investing group?
Brianna McDonald: (12:31)
Research local groups, attend meetings, and connect with angel investors in your area.
Jean Chatzky: (13:09)
I appreciate your advice to observe before jumping in.
Jean Chatzky: (14:32)
Angel investing carries risks. I've had mixed experiences with my investments.
Brianna McDonald: (14:32)
It’s essential to invest in companies that will navigate growth successfully.
Jean Chatzky: (16:41)
What was your first investment?
Brianna McDonald: (16:44)
My first investment was in Theo Chocolate, the first organic chocolate maker in the U.S. It was a successful venture.
Jean Chatzky: (17:49)
What are the challenges new investors face?
Brianna McDonald: (17:58)
Due diligence is crucial. Examine financials and maintain communication with CEOs.
Jean Chatzky: (19:44)
Is Keiretsu a good starting point for new investors?
Brianna McDonald: (19:59)
Absolutely, our community offers strong support and education for investors.
Jean Chatzky: (21:26)
Is this still a male-dominated field, or is it changing?
Brianna McDonald: (21:58)
It’s changing, but we need more women investors at the table. Currently, only about 25% of angel investors are female.
Jean Chatzky: (22:35)
Where can we learn more about you?
Brianna McDonald: (22:38)
Visit K4northwest.com or KeiretsuForum.com for more information.
Jean Chatzky: (23:31)
Thanks for the information, Brianna.
Brianna McDonald: (23:45)
Thank you, Jean.
Jean Chatzky: (23:54)
Now let’s dive into the mailbag.
Jean Chatzky: (23:54)
Kathryn Tuggle joins me now. Hi, Kathryn.
Kathryn Tuggle: (23:58)
Hi, Jean! That was an informative episode.
Jean Chatzky: (24:00)
I’m glad our listeners are interested in this topic. We receive many mailbag inquiries about investing and personal finance.
Kathryn Tuggle: (24:49)
For many, this means supporting fellow female entrepreneurs through angel investing.
Jean Chatzky: (25:17)
I’ve enjoyed investing in female-led companies in finance.
Kathryn Tuggle: (25:53)
Absolutely. That was a pivotal moment for HerMoney.
Jean Chatzky: (26:05)
Now, let’s address our mailbag questions.
Kathryn Tuggle: (26:13)
Our first question comes from Jennifer. She writes, hi Jean and Kathryn. I’d like to set aside some money for a down payment for my son’s house. What account should I use for this savings?
Jean Chatzky: (26:28)
This isn’t angel investment money, as you have a specific purpose for it. For a long-term goal, consider a diversified portfolio, but for a shorter timeframe, a high-yield savings account is best.
Kathryn Tuggle: (28:12)
Great advice, Jean.
Jean Chatzky: (28:14)
Sure.
Kathryn Tuggle: (28:16)
Our next question is from an anonymous listener. She shares her credit struggles after missing payments during the pandemic. What can she do to improve her situation?
Jean Chatzky: (30:01)
First, stop blaming yourself! Your credit score can recover. Set up alerts for payment due dates and ensure on-time payments to rebuild your score.
Kathryn Tuggle: (33:07)
Is recovery dependent on credit card companies increasing her limit?
Jean Chatzky: (33:15)
Yes, but consistent on-time payments will also help significantly.
Kathryn Tuggle: (34:12)
What about the listener with a large balance on a no-interest card?
Jean Chatzky: (35:31)
Consider a balance transfer card or personal loan to lower the interest rate. Look into home equity if applicable.
Kathryn Tuggle: (37:37)
Great suggestions, Jean.
Jean Chatzky: (37:39)
Thank you, Kathryn. Keep those letters coming to info@savinghunt.com. Now, let’s discuss finding the best deals at Costco. A membership can be worthwhile if you shop regularly and have space for bulk items.
Jean Chatzky: (38:45)
Costco can save you money on gas, Kirkland brands, and more, but assess your shopping habits before committing.
Jean Chatzky: (39:01)
You can cancel your membership for a refund if you’re unsatisfied.
Jean Chatzky: (40:19)
Thank you for joining us today. We appreciate Brianna McDonald’s insights on angel investing. If you enjoyed this episode, please subscribe and leave a review! We value your feedback.
Jean Chatzky: (23:45)
Thanks for listening, and we’ll connect again soon.
