Accredited Investors & Angel Investors

How will you be changing you today?

Good question, DT.

And the answer is?

I think of myself as a millionaire. With a 6-figure annual income.

Wow, is that all?

Actually, no it isn't.

What else is there?

How about "I am now an accredited investor"?

How does that work?

I'll tell you. The definition of how an investor becomes an accredited investor is maintained by the SEC.

The SEC? The Securities & Exchange Commission?

Yes. The group we talked about in episode 45.

and the $1,000,000?

The SEC says you have to be worth $1,000,000, not including your house. Your primary residence.

No big deal.

Not as much as it used to be anyway. It's a serious problem for some people. But we can all overcome it. If we need to. Experienced investors do.

And the $200,000 part? Besides your plans to invest that much next year?

It’s one of the tests for income provided by the SEC. They say you have to have an income of $200,000 as an individual or $300,000 in joint income as married couples.

In addition to the million dollars?

Yep, both. DT. And the million dollars.

Okay, so what is an Angel Investor? And how is it different from an an accredited investor?

An angel investor is a usually pretty well-off natural person who backs startups and entrepreneurs.

That’s nice.

Yes, even though it’s typically in exchange for ownership. Or part of ownership.

Well, you gotta start somewhere.

True, and it can be not far away. Sometimes, angel investors are family and friends.

I’m still not clear on the difference.

It’s the different sources of funding…

Angel investors use their own money for these private investments, unlike venture capitalists who pool money from other investors in a private equity fund.

Essentially, members of the angel network are the opposite of venture capitalists.

Any examples I would know?

Maybe. Cable TV used to have Marcus Lemonus and a cable show called The Profit,

Spelled like the gains and not like wisdom,

Yes, and he would be a venture capitalist.

In it for the money, not the story. Any other titles to look out for besides Angels?

A few. Angel investors are also called informal investors, angel funders, private investors, seed investors or business angels.

Some more experienced angels invest through crowdfunding platforms online or build angel investor networks to pool capital together. You can Google those if you’d like to look at the deal flow.

So, you can be an accredited investor but not be an angel?

True, DT. Either way, you have to have the money, though. Both have the finances and desire to provide funding for business startups.

Just different motives.

Just different motives.

In fact, startup community company founders often look for angel skills first, finding VCs, or venture capitalists, to be a bit more….

Predatory?

Thanks for saying that for me.

De nada. Where did the angel name come from?

The term "angel" came from the Broadway theater, when wealthy individuals gave money to save theatrical productions.

A different sort of public funding, then.

Kind of, yes.

Who Can Be an Angel Investor?

All individual investors who are looking for a defined exit strategy.

Like?

Like getting out completely after a few years, or maybe a high ROI.

How high is the rate of return they want?

Sometimes as much as 22%.

Aren’t there cheaper ways to get money? Another source of funding?

Like, a bank?

Maybe…

Cheaper sources of financing such as banks are not usually available for such business ventures.

Why?

Too risky for them.

Or at the very least, outside of their wheelhouse.

As they say, yes.

But angel investing is still very important

Again, why?

Because angel investing has grown a lot over the past few decades. I consider this investment opportunity a very serious MSI.

And it’s yet another angle we can explore together if you’re interested.

I’m quite certain that a break would help our friends digest that one.

I think you’re right! With the additional time, it has to sink in!

Have you ever tried to get any angels?

I have, as a matter of fact.

When was that?

It was in 2016. About five years ago.

Tell us about it.

So I ran across this guy and his group. I don't remember where. LinkedIn probably.

and they were having some meetings and workshops. About preparing pitch decks.

Pitch decks?

The name for. Slide presentations. Designed to. Excite individual private investors into. Making you an offer. To start negotiations.

Sounds like a pretty big job!

It is mostly. And it requires a team. Which is an important part of this whole idea that I didn't yet understand. And maybe the organizer didn't understand yet either.

But you're going into this by yourself.

Yes. Which is yet another reason why I like patience so much.

And the feeling like I can do things more than once and it's OK. I don't have to get it right the first time.

That's what I'm doing. That is one of the things I'm trying to pitch here.

Back in the day, there was nothing but a huge availability of software packages and presentation tools.

For?

To help you create those pitch decks I mentioned. It was its own industry.

Can this affect your goals?

Absolutely. A super successful business turned into an MSI and made part of your whole Income Plan? Are you kidding me?

IF it's successful.

There's that DT. If it's successful, it can, in itself take pressure off other areas to also perform.

Your whole portfolio plan could change?

That's right, DT. And that's OK. We're being flexible. We adjust our plan on the fly. To accommodate the biggest winners.

Well, that's not very unusual.

No, it's not, and that's a good thing. We're winning and we're calm about winning.

You know, I think about what it was like making that presentation.

Yeah, what was it like?

It was interesting. I had to go there not knowing what to expect. Not knowing what my competition would be providing. Not knowing who would be there. Or even what their motivation was. Fortunately, the place had lots of exits even though I didn't need them.

And how did it go?

It was in a crowded, warm, not terribly well-lit bar.

Fortunately, most of the crowd was in on the presentation idea for an angel investment. We didn't have to yell over everybody all the time. But still it was challenging.

Were you successful?

No, I wasn't that time. This circles back to patience though, because as I reflect on it, with this attitude of calmness and learning applied…I see that it was OK.

It was important to do that - to jump in and get my feet wet. Even though I didn't get it right, I know what better to do the next time around.

The point was that you did it.

Yeah, I did. And I had to do it. I had to learn from first-hand experience. There was no way I could get that second-hand or third hand or whatever.

And should you do it again the next time?

Should I or Would I?

Should you?

Should I do it again? I'll know what to do better from the experience of having tried it.

Like from time to time when we try breaks.

Yeah, like that.

There was, a while ago, a bunch of people who were interviewing to see who would lead a mountain expedition.

Describe the room they were in.

DT, I'm working on being a better storyteller as you know, but I'm not quite ready to go there yet.

Next year, then.

Okay, but what about now?

I would just go on.

Right. There was also a psychologist.

And his job was?

To make sure. That the person who led the expedition was the person most mentally fit to do so.

So how did that go?

It went very well actually. This psychologist asked this of every person interviewing to be on the team.

I would have loved to be a fly on THAT wall.

Me, too! And while many of them said “I'm sure going to try” or “I'll give it my best”, one person.

One person?

One person with the relevant experience said, without needing any considerable time. “Yes I will”.

That sounds oddly familiar.

That's because the Spanish and French translations. Respectively. Are Eso Es Bueno, and Oui je la ferai.

Oh, that's where I've heard it. Since we focus on language a lot.

Among other things, yes. But make sure you don't forget this point.

Which is what?

He said “Yes I will”.

Oh, there was a confidence in his voice.

Yes, in his voice…in his attitude…in his mind…in his being.

He visualized himself at the top. Of the mountain. Successful, no matter how hard it was. No matter what anybody else said.

That's kind of like your 1% better idea, isn't it?

You know that's not my idea.

OK, yes I was being nice for a change. Not your idea…THE idea!

It is similar, yes.

And how does that work exactly again?

Well, it's a concept which has been turned into a meme and motivational speeches and lots of different things. Maybe even NFTs.

But the idea is totally in line with my idea. With my policy. Of predetermining and even scripting gains.

Scripting gains?

I'll get into more detail about that in future pods.

The general idea for now.

OK, here goes.

Write this down.

Yes, use a scratch pad, but please, please do the math for yourself.

What if you hate math?

Do it anyway. You'll improve with practice - in math and in the goal that you're working on

here.

OK, let me help. You're starting with today. And today is 1.00.

And if you improve by 0.01…

Then tomorrow it’s 1.00 + 0.01 or 1.01.

Right, DT! You are 1% better tomorrow.

Now, what if you do that every day for an entire year?

365 days, 365 and a quarter day to be exact.

Geek.

You will be 37 times better at whatever that thing is investing, speaking, writing, running. Loving. Whatever.

By the end of a year?

Yep! By the end of the year, you'll be 37 times better than when you started.

Just 1% per day?

Yes, DT just 1% per day.

But that makes practicing easy!

Too easy for you?

I didn’t say that.

But you admit that easier can lead to better.

Unless you use it for an excuse.

True, but we’ll say that you don’t do that.

Instead, you practice MORE.

Which means better practice.

After which…

YOU’LL GET GOOD!

¡Gracias por escuchar! ¡A la prochaine!