March 17, 2022

Check on your friends, not your inbox: My lessons from one year as an angel investor

What Kim Fai Kok has learned from one year as a professional angel investor in startups.

Kim Fai Kok

4 min read

I decided to become a full-time angel investor 12 months ago after spending close to a decade in a fast-scaling tech company. It was time to hit the reset button; I wanted to control how I spent my time and who I spent my time with — and learn something new. 

More operators choose to give back to the next generation of companies as angels, but the path is often not straightforward or clear. And once you advertise that you're investing, messages from founders looking to raise pour in. 

👉 Read: Angel investing 101 — everything you need to know

Here are some key lessons that I learnt in the past 12 months as an angel investor.

Don't go at it alone

I don't invest by myself; I invest with three of my closest friends and former colleagues and a network of other angel investors. We all come from different backgrounds and have different skillsets and experiences that complement each other, which is a great value add for the companies we back. Angel investing in a group also helps us cast a wider net and get a broader deal flow. 

Angel investing in a group helps us cast a wider net and get a broader deal flow

We often get asked: "Why don't you just raise a fund?" We decided very early that we didn't want to do that, mainly because we felt that our time was much better spent helping founders build their businesses and we had the flexibility to invest from our own pockets. 

But whoever you plan to do this with, make sure there's an alignment regarding how you want to invest and who should contribute what. We did that by writing down our guiding principles and why we were doing this. But, having worked in a startup, we know that things don't often go as planned. So these guiding principles are just that — guiding — and we don't want to over-plan how to approach angel investing.

Be very clear about what founders and companies you want to back

Whether you're planning on starting angel investing full-time or part-time, it's really helpful to think deeply about what kind of companies you want to invest in and spend your time with (if you plan to be an active angel, so to speak). This will help sift through companies that don't necessarily fit your thesis. 

To give an example, here's our guiding compass when assessing a company:

  1. There needs to be a strong "founder-market fit." 
    1. Does the entrepreneur(s) have the passion and obsession with solving a problem (preferably a pain they have experienced themselves)? And do they care about their customers?
    2. Do they have a compelling founding story, and what is their purpose in what they're doing? 
    3. Do they have the hunger, and do they have something to prove? And will they work relentlessly to beat the rest of the competition?
  2. Are they looking to become a category creator, or do they want to become a category leader in their industry/niche? And what are the technical insights they have that nobody else has? 
  3. Is their solution scalable (is the market big enough and growing?), and are they on the verge of reaching product-market fit?

Be ruthless with how you spend your time and prioritise

Once you decide to transition into full-time investing, I can assure you that many people will reach out to meet and pick your brain on various topics. That is why it is crucial to structure and prioritise those meetings to avoid becoming overwhelmed and unproductive. The way I've structured it and how I prioritise my time is by categorising them into three different groups.

  1. Close friends and portfolio companies — 60-70% of my time goes into helping companies I've invested in and supporting people in my closest circle.
  2. Acquaintances and industry friends — 20% of my time goes into meeting industry folks and catching up with acquaintances I've gotten to know over the years to have a close ear to the ground.
  3. Inbounds and people cold-emailing me — Finally, the 10-20% of my time remaining goes into meeting new founders, operators and other people reaching out for various reasons.

Deciding how to prioritise your time is also closely linked to how you position yourself as an angel. We'll be involved as much as the team wants us to be, and we have no problem backing away when the company starts scaling. We also don't want to be seen as freelancers or consultants, and therefore, we never take those gigs. And the company we work with knows that it isn't about the time we put in, but it is actually the value we provide as a collective. 

Deciding how to prioritise your time is also closely linked to how you position yourself as an angel

Angel investing is something that's available to anyone who's had experience in a startup. Once you're in it, it's easy to feel overwhelmed by deal flow or learning the ropes. A great solution: peers to support you, a clear idea about what you're looking for and a plan for prioritising your time.