“Don’t wait for an opportunity, make it! – Dennis Kimbro, Think and Grow Rich A Black Choice
Over the years, investing in start-ups was historically available for the uber-wealthy and people with strong venture capital connections. Being curious to stay ahead of the technology curve I wanted to learn as much as possible about investing in early stage technology companies but I didn’t know where to start. So I did extensive research which kickstarted me to save up a few dollars and see if I could choose wisely a profitable seed round company and this is what I learned.
Nothing you’re about to read is intended to portray me as an investing expert and this is only my story.
Back in 2014, I read a pitch deck from an upcoming startup based in Atlanta, GA named Part Pic founded by Jewel Burks and Jason McCain. Part Pic developed a sophisticated software that takes a photo of a specific screw or bolt and the technology recognizes the part by the name and number of the part which traditionally was curated by a phone book size order catalog.
At the time I was living in Johannesburg, South Africa and would visit the United States once or twice a year to catch up with work and friends and family. Ironic because that is what they call the first stage of startup investing, the “friends and family” round in hopes to get seed funding that will take your idea from prototype to full development and eventually on the market.
The founders emailed me an investor’s deck and immediately I understood the technology part of the company. Next step I wanted to talk to the owners and learn more about their entrepreneurial journey and their goals. They each worked in Silicon Valley for major technology companies and convinced me that they understood what it takes to build a software product.
Finally, I decided to take my chance and jump into angel investing, trusting my instincts and years of consumer behavior knowledge and forecasting advanced technologies that were spreading even to developing nations in Africa and Asia. “Angel investing” means putting relatively small amounts of money — often from $15,000 to $100,000 — into early start- ups eventually converting to equity or a profitable payout. For me, I wanted to use my “investing fund” that I had been saving for a few years and give it a shot.
Part Pic went on to become a finalist at TechCrunch SF, winner of an SXSW Accelerator, invited to the first White House Demo Day and gaining nationwide media exposure. My investment became a success and I not only learned a valuable lesson in how to invest properly in a start up but I also gained a small return on the investment that gave me a rewarding sensation to see a small team blossom into a company that would be acquired by a Fortune 500 company.
“There was a time America wouldn’t let us ball. Those times are back just now called Afrotech.” — Jay-Z
It’s no secret that women along with black-owned start-ups are getting a smaller share of the venture capital investments. Between 2011 and 2013, companies owned by females got only 3% total of venture capital dollars. Not surprising since a McKinsey study proved that 92% of senior investment teams are male and furthermore 78% white.
Here’s what I learned and exactly how I make an investment of capital, time and energy.
- The product must be consumer driven
I look for a product or service that I would use myself and can forecast a future growth that would expand to other consumers and users such as myself.
2. The company and product must have integrity
If the founder is very passionate about their company I look for an entrepreneur that has a set of core values beyond the dollars and cents. The mission must be able to pass further than the idea and last for years to come.
3. Make sure to have the option to transfer your convertible note to equity
The main benefit to an entrepreneur is the simple structure of a convertible note which essentially is a form of debt that doesn’t allow to create a second class of shares and they can focus more energy to generate potential returns for their investors.
4. Secure the bag first
If you want to make a small fortune, start with a large fortune and angel invest. You have to be willing to walk away from the temptation to invest in every great idea or “disrupting” start-up and make sure you’re able to accept the losses with the rewards. Do not invest large cash amounts unless you’re able to maintain your personal finances and debts.
If you know someone who has a profitable business model and not just a cool idea then encourage them to build a product and find their 1,000 true fans to support their business. If you want to build your portfolio then start saving the finances and place them in a business account and do the research necessary to become an accredited investor. Remember in 1998, Jeff Bezos invested $250,000 in Google and earned an estimated share of $2.3 billion today. Don’t be fooled by the unicorn success stories, an estimated 75% of startups fail and don’t become profitable. Do your own research and be patient with the process, it’s not about quantity but quality when it comes to flipping your hard earned money.
If you have a startup and looking for an angel investor or strategy advice contact me on Angel List ( http://bit.ly/1L8eO3X )
