How to Start Angel Investing in 2025

Let me share my story first: I'm currently on my journey as an angel investor with two investments under my belt. One of them has already collapsed - yes, you read that right. Despite knowing that success rates are low and returns can take years, I still love being an angel investor. Why? Because it's not just about the money. It's about helping entrepreneurs grow their businesses and being part of exciting new ideas.

But before you get excited about finding the next unicorn startup, let's talk about what angel investing really means and if it's right for you. I'll share both my experience and the hard data to help you make an informed decision.

What Is an Angel Investor?

An angel investor is typically a high-net-worth individual who provides capital for startups in exchange for equity. But it's more than just writing checks. Angel investors often:

• Invest their own money (unlike venture capitalists who manage funds)
• Get involved early in a company's life
• Provide expertise and connections, not just money
• Take high risks for potentially high returns

The Path to Becoming an Angel Investor

Step 1: Qualify Financially

In most countries, you need to be an "accredited investor," which typically means:

• Annual income over $200,000 ($300,000 with spouse)
• Net worth over $1 million (excluding primary residence)
• Professional investment experience

Step 2: Build Your Knowledge Base

Before investing a cent:

• Study startup economics
• Learn about term sheets and valuations
• Understand cap tables
• Get familiar with due diligence processes

Step 3: Start Networking

Connect with the startup ecosystem:

• Join angel investment groups
• Attend startup pitch events
• Network with other angels
• Build relationships with accelerators

The Hard Numbers First

Let me be honest: I started angel investing knowing these sobering statistics, and my experience so far (with one failed investment) confirms them:

• 52% of all exits return less than the invested capital
• Only 7% of exits achieve returns of more than 10x
• The average return is 2.6 times your money in 3.5 years

But here's the thing: While the numbers matter, they're not the only reason to become an angel investor. For me, being part of innovative solutions and helping entrepreneurs achieve their dreams adds value beyond just financial returns.

Size Matters (A Lot)

Here's what happens based on how many companies you invest in:

• 1-5 companies: Median return of 0% (yes, zero)
• 10 companies: 6% return, but 32% chance of losing money
• 20 companies: 7% return, with 16% chance of losing money
• 50 companies: 10% return, with 11% chance of losing money

See the pattern? You need a big portfolio to make this work.

Time Is More Than Money

Want better returns? You need to work for them:

• Less than 20 hours on due diligence: 1.1x return
• More than 20 hours: 5.9x return
• More than 40 hours: 7.1x return

And that's just the start. Regular interaction with your portfolio companies (about twice a month) can triple your returns compared to occasional check-ins.

Getting Started as an Angel Investor

1. Education First

• Take angel investing courses
• Read books on startup investing
• Follow experienced angels online
• Study successful and failed investments

2. Start Small

• Join an angel syndicate
• Invest alongside experienced angels
• Make small initial investments
• Learn from each deal

3. Build Your Process

• Create an investment thesis
• Develop due diligence checklists
• Set clear investment criteria
• Plan your portfolio strategy

The Real Requirements for Angel Investing

Before you start, ask yourself:

1. Do you have enough capital?

• Can you invest in at least 20 companies?
• Can you afford to lose it all?
• Do you have additional funds for follow-on investments?

1. Do you have the time?

• 40+ hours per investment for due diligence
• Regular meetings with portfolio companies
• Networking and deal flow development

1. Do you have relevant expertise?

• Industry knowledge
• Business evaluation skills
• Network for deal flow

When Angel Investing Makes Sense

Consider becoming an angel investor if:

• You can afford to invest in 20+ companies
• You have expertise in specific industries
• You can dedicate significant time
• You understand and accept the high risk
• You have a long-term horizon (5-10 years)

When to Stay Away

Angel investing isn't for you if:

• You can't diversify across many investments
• You need the money back within 5 years
• You can't afford to lose the investment
• You don't have time for due diligence
• You're looking for steady returns

How to Get Your First Deal

1. Join Angel Groups

• Local angel investment networks
• Online platforms like AngelList
• Industry-specific investor groups

1. Build Your Deal Flow

• Attend startup pitching events
• Connect with accelerators
• Network with other angels
• Engage with startup communities

1. Start Due Diligence

• Verify the team's background
• Analyze the market opportunity
• Review financial projections
• Check legal documentation

The Bottom Line

Angel investing can be rewarding, but it's not a passive investment strategy. The average returns (around 2.5x over 4.5 years) might sound attractive, but remember this includes the rare massive wins that offset many losses.

If you're still interested, start small:

1. Join an angel investment group
2. Learn from experienced investors
3. Start with small investments
4. Build your portfolio gradually
5. Focus on industries you understand

Remember: The S&P 500 has often outperformed angel investing portfolios with far less work and risk. Make sure you're in it for the right reasons - not just the potential returns.

Want to explore other investment options first? Check out my article on The Wealth Triangle for a structured approach to building wealth.

Disclaimer: This article is based on personal experience and should not be considered financial advice. Always consult with a qualified financial advisor before making investment decisions.