The rush to become an angel investor mirrors the increase in the appeal of the “celebrity entrepreneur” we’ve seen over the last couple of decades. To flourish, the investor community must consolidate more (i.e. become an LP in a fund vs doing our own thing) and those who remain independent must level up their value-add.
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There could not be a bigger question than what we should be focus on right now, coming out of the US election, going into a new year. What’s both weighing on me and exciting me has to be the global shift that we’re seeing in public opinion about policy and regulation, and the role of entrepreneurship and innovation. And what I’m referring to is of course, not just what’s going on in the U.S. but what’s been going on in Argentina, what’s been going on in Europe, and even in Canada with the news of Justin Trudeau. What we’re seeing is a new age of independence; a social change with regards to this notion that we can and should have the right to support of our communities directly and to thrive individually.
In our world, angels, what that means is a tremendous boon for entrepreneurs; refocus of appreciating what it is that people like us do; this year we’re going to see a resurgence and a new enthusiasm for how new technologies can help us live the lives and work in the ways that we prefer and should be able to work.
We’ve seen a rush of people who want to invest in startups in the same sense that we’ve seen a rush of people who want to do a startup. Roughly, right before the mortgage crisis and the bust in 2008, we started to turn such people into the new celebrity. The celebrity in our culture used to be the athletes or the astronauts, or even the scientists to some extent. Now it’s the entrepreneur. I think everybody can agree. And to a great extent as well, it’s being able to go to a happy hour and say, you’re an angel investor, or a venture capitalist. That is a wonderful thing.
The challenge in that though is that at the same time, the internet completely broke our understanding of what marketing means. And what I mean by that is that historically, 30 years ago, marketing was all of the work related to the market, all of it: market research and doing competitive analysis, figuring out what team you should have, and figuring out who the investors are. It was literally everything. And yet today it’s perceived as just promoting what you’ve got, advertising what you’re doing, or being an influencer.
The challenge inherent in those two things happening, the enthusiasm and the exuberance and the celebrity of entrepreneurship and investing, as well as the disruption of what marketing means, means that we have a whole bunch of people in the ecosystem now who aren’t doing marketing, traditional marketing.
And there’s my criticism and encouragement, angel investors, that if you exuberantly invest in things because your friends so, or because you saw a great pitch, or because you think someone has a great idea, I’m grateful to you, but you’re going to lose your money. You aren’t doing the marketing work or working with the marketers to understand the real trends, what’s actually possible, and what is just irrational exuberance.
What I get really passionate about when I’m working with angel investors and venture capitalists is the appreciation that 20-25 years ago, even 15 years ago, most people who today are individual investors, even family offices, people who want to be angel investors… most of those people would be LPs.
They would put their money with experienced professionals who are managing directors, who are general partners, who are people like myself, or who are managing partners in funds. They would put the money with people who know what they’re doing. Put your money with the people that get the deal flow, have experience with startups, have teams of people, people who do due diligence on things, principals who look at trends in the market and trends in the ecosystem, in order to better direct where capital is allocated.
Almost everyone is coming out now saying, “if you are not a storyteller as an entrepreneur, you’re going to fail.”
If you do not have a community, if you’re not on Substack, if you don’t have a newsletter, then I’m not investing in you. I don’t care what you’re doing. Why? Because you must, you must, you must, you must, you must create your audience. You must support your audience. You must drive demand, right?
And yet, many angel investors don’t require this of their founders. That, or they don’t understand it, don’t know how, or worse, don’t agree.
If you don’t know how, don’t know why, or can’t help founders do this, invest through venture capital funds where the partners and team involved is both taking and mitigating risk for you. If you are capable at a seed stage, when a startup has no clear path to revenue, an insufficient team, and needs help, you’d best be getting involved as a philanthropist and advisors to help them find success. Fail this, and you’re causing problems.
There have always been “organized” angels wherein individual investors come together to look at deal flow, conduct due diligence, develop standard investment docs, invest, and monitor their investments.
What originally tied them together was geographical location, common experience, and, most importantly, being “accredited investors” as the US SEC defines that term.
If you study angel networks like Band of Angels that is based in Silicon Valley they evolve until they are essentially VC firms with a slightly different membership and funding source.
This is also a milestone as to the current state of development in the local market.
Band of Angels took flight in the early 1990s whilst the Central Texas Angel Network did not launch until around 2006 (operating from memory here, so I may be off, but the point is SV was a decade sooner than Central Texas and is substantially more sophisticated in the deal flow, due diligence, decisionmaking, investing, and monitoring of their portfolio).
The other thing — as you note – is that organized angels have a broader mix of talent to tap from a mentoring perspective.
Andrew Clark cheers. Now, help me (or us) figure out how to get every investor on the same page, because the problem isn’t that this isn’t known, it’s that startup ecosystems continue to struggle with wannabe investors and inexperienced Angels.
Paul, thanks for joining me on the show. Seriously, I will be sending this episode to every new Angel I meet. Your comments about “add value or get out” were spot on and I will 100% keep your “never say revenue/profit” quote in my back pocket. Cheers!
Paul O’Brien the hardest thing ppl miss is that investors / LPs / Angels have a higher degree of optionality to admittedly “do what they want”.
Ironically, LPs can drive much of the strategy of funds almost like Foundations/Donors drive non-profits
Andrew Clark Paul O’Brien I also think there’s an education problem here. There’s 1 billion “how to trade stocks” courses and trainings and apps and videos. There are only a few quality sources for “how to invest in early-stage startups well”.
Andrew Kazlow I was just talking about this with a close friend who has been encouraging that I should be teaching venture capital investors. I’ve thought about it for years… the dilemma, I find, is Andrew Clark’s optionality point. Too many with wealth either think:
1. They know better because they were successful
2. They are helping, they’re writing checks
3. They don’t actually care, they just want to be part of the club.
4. People who aren’t writing the checks shouldn’t be making the decisions
I suspect the % of people who genuinely want to be angel investors is exceptionally small; evident in the fact that very few of them are well known and helping beyond writing a check.
I’ve built the incubator curriculum, and teach cities that want to be startup ecosystems, I can’t help but wonder if WITH a couple of angel stage partners, we could build the curriculum but also overcome the challenge of capably finding the people who truly want to be exceptional at this.
It’s crucial for angel investors to focus on mentorship and network access for startups. Encouraging founders to think globally can unlock new markets and opportunities, ensuring both the startup and the investor benefit from a broader perspective.
“Smarter capital starts with rethinking what we define as ‘risk’ in founders.”
Paul O’Brien is right—founders must be storytellers, community builders, and demand creators. But what happens when brilliant, visionary founders are trapped in burnout, isolation, or systemic barriers that make these skills inaccessible?
The current system isn’t designed for the founders who are solving our biggest problems—the ones with lived experience, deep expertise, and the ability to spot and fill critical gaps in markets. We lose these founders, not because their ideas aren’t investable, but because they lack relevant support.
Investors talk about mitigating risk, but the real risk is ignoring the founders who don’t fit the mold of what we’ve been trained to expect.
• The single mom founder who can’t access capital because of an unstable home situation.
• The autistic innovator who burns out because they are expected to operate in systems designed for a different kind of brain.
• The social impact visionary who’s spending all their energy surviving, rather than scaling.
We’re in a global shift. The smartest capital will back the smartest solutions. If you’re serious about funding founders who will define the future, it’s time to ask:
Are we investing in real innovation? Or just in founders who can play the game?
What if we support the design & build of a trauma-informed brand security incubator—a safe-space residency for founders who don’t need to be taught how to tell their story, but need a village that ensures they have the capacity, protection, and support to execute.
Coincidentally, I just saw and shared the old Hacker News post about a carnival (enclosed).
“Are we investing in real innovation? Or just in founders who can play the game?”
That, that old post is misleading, implying that people with means or privilege have the advantage.
The people who play the game are the people with means or access who can throw dart after dart, playing the game SUCH AS IT IS, exceptionally well. That isn’t innovation. Investors supporting such people are fooling themselves into mediocrity and we shouldn’t keep celebrating investment in more of the same.
I think a fair number of people are both angels and LPs. Jacquie Duval (fund formation specialist) and I (corporate / direct investment specialist) give a combined presentation on understanding direct angel investing issues and your first LP commitment.
Paul O’Brien Powerful take on the evolution of angel investing! Your point about diligence really resonates, especially in today’s threat landscape. I’ve noticed a fascinating trend: startups with robust security frameworks from day one tend to have smoother fundraising journeys and stronger valuations. They’re essentially de-risking their growth story.
The part about “smart money” vs “dumb money” extends beyond operational expertise – it’s also about helping founders build trust-driven businesses that can scale securely. Would be curious to hear your thoughts on how early-stage investors should evaluate a startup’s security posture as part of their diligence process?
Early-stage investors shouldn’t fund security overkill at the expense of speed, traction, and capital efficiency. Security matters, but diligence should focus on what actually matters at that stage.
Stage-appropriate security – A pre-revenue SaaS startup doesn’t need enterprise-grade security. Fit-for-purpose is key.
Risk-weighted trade-offs – Do founders grasp their biggest risks, or are they blindly over-investing?
Regulatory foresight, not compliance theater – Security should serve real business needs, not just check certification boxes.
Founder mentality – Are they risk-aware but not risk-averse?
Security matters, but if it slows growth, it’s a liability. Are too many startups over-prioritizing it before it’s necessary?
Angel investing isn’t just about writing checks, it’s about bringing real value. Too many jump in without understanding the game, and it shows. Smarter capital and sharper diligence are exactly what the ecosystem needs.
Great insights! The idea that many angels invest without true diligence is a crucial point. How do you think independent angels can better equip themselves to add real value? Are there specific strategies or resources you would recommend?
Many angel investors dive in without adequate due diligence, which can be a disservice to both themselves and the startups they aim to support. To truly add value, independent angels should consider the following strategies:
Collaborate with Experienced Investors: Engaging with seasoned investors or joining angel networks can provide valuable insights and shared resources for thorough due diligence.
Leverage Professional Expertise: Utilizing legal and financial advisors can help in assessing investment opportunities more effectively.
Engage Directly with Founders: Building relationships with entrepreneurs allows for a deeper understanding of their vision and operational strategies, which is crucial for informed investment decisions.
In the continuum of investing:
Bootstrapping,
Friends & family,
Angels
Organized angels,
VC Seed
VC Series A/B/C/D etc
There have always been “organized” angels wherein individual investors come together to look at deal flow, conduct due diligence, develop standard investment docs, invest, and monitor their investments.
What originally tied them together was geographical location, common experience, and, most importantly, being “accredited investors” as the US SEC defines that term.
If you study angel networks like Band of Angels that is based in Silicon Valley they evolve until they are essentially VC firms with a slightly different membership and funding source.
This is also a milestone as to the current state of development in the local market.
Band of Angels took flight in the early 1990s whilst the Central Texas Angel Network did not launch until around 2006 (operating from memory here, so I may be off, but the point is SV was a decade sooner than Central Texas and is substantially more sophisticated in the deal flow, due diligence, decisionmaking, investing, and monitoring of their portfolio).
The other thing — as you note – is that organized angels have a broader mix of talent to tap from a mentoring perspective.
I’m looking forward to watching another great episode!
Mitra Miller not sure if this is helpful but FYI
Can’t argue with his logic on that
Andrew Clark cheers. Now, help me (or us) figure out how to get every investor on the same page, because the problem isn’t that this isn’t known, it’s that startup ecosystems continue to struggle with wannabe investors and inexperienced Angels.
Paul, thanks for joining me on the show. Seriously, I will be sending this episode to every new Angel I meet. Your comments about “add value or get out” were spot on and I will 100% keep your “never say revenue/profit” quote in my back pocket. Cheers!
Paul O’Brien the hardest thing ppl miss is that investors / LPs / Angels have a higher degree of optionality to admittedly “do what they want”.
Ironically, LPs can drive much of the strategy of funds almost like Foundations/Donors drive non-profits
Andrew Clark Paul O’Brien I also think there’s an education problem here. There’s 1 billion “how to trade stocks” courses and trainings and apps and videos. There are only a few quality sources for “how to invest in early-stage startups well”.
Andrew Kazlow I was just talking about this with a close friend who has been encouraging that I should be teaching venture capital investors. I’ve thought about it for years… the dilemma, I find, is Andrew Clark’s optionality point. Too many with wealth either think:
1. They know better because they were successful
2. They are helping, they’re writing checks
3. They don’t actually care, they just want to be part of the club.
4. People who aren’t writing the checks shouldn’t be making the decisions
I suspect the % of people who genuinely want to be angel investors is exceptionally small; evident in the fact that very few of them are well known and helping beyond writing a check.
I’ve built the incubator curriculum, and teach cities that want to be startup ecosystems, I can’t help but wonder if WITH a couple of angel stage partners, we could build the curriculum but also overcome the challenge of capably finding the people who truly want to be exceptional at this.
Great Podcast Paul. Very informative for anyone in the startup or Venture Capital universe.
It’s crucial for angel investors to focus on mentorship and network access for startups. Encouraging founders to think globally can unlock new markets and opportunities, ensuring both the startup and the investor benefit from a broader perspective.
“Smarter capital starts with rethinking what we define as ‘risk’ in founders.”
Paul O’Brien is right—founders must be storytellers, community builders, and demand creators. But what happens when brilliant, visionary founders are trapped in burnout, isolation, or systemic barriers that make these skills inaccessible?
The current system isn’t designed for the founders who are solving our biggest problems—the ones with lived experience, deep expertise, and the ability to spot and fill critical gaps in markets. We lose these founders, not because their ideas aren’t investable, but because they lack relevant support.
Investors talk about mitigating risk, but the real risk is ignoring the founders who don’t fit the mold of what we’ve been trained to expect.
• The single mom founder who can’t access capital because of an unstable home situation.
• The autistic innovator who burns out because they are expected to operate in systems designed for a different kind of brain.
• The social impact visionary who’s spending all their energy surviving, rather than scaling.
We’re in a global shift. The smartest capital will back the smartest solutions. If you’re serious about funding founders who will define the future, it’s time to ask:
Are we investing in real innovation? Or just in founders who can play the game?
What if we support the design & build of a trauma-informed brand security incubator—a safe-space residency for founders who don’t need to be taught how to tell their story, but need a village that ensures they have the capacity, protection, and support to execute.
Coincidentally, I just saw and shared the old Hacker News post about a carnival (enclosed).
“Are we investing in real innovation? Or just in founders who can play the game?”
That, that old post is misleading, implying that people with means or privilege have the advantage.
The people who play the game are the people with means or access who can throw dart after dart, playing the game SUCH AS IT IS, exceptionally well. That isn’t innovation. Investors supporting such people are fooling themselves into mediocrity and we shouldn’t keep celebrating investment in more of the same.
I think a fair number of people are both angels and LPs. Jacquie Duval (fund formation specialist) and I (corporate / direct investment specialist) give a combined presentation on understanding direct angel investing issues and your first LP commitment.
Valeska Pederson Hintz brilliant and yes, many are very good at this. Let me know when your next talk is being help, I’d like to share it.
Paul O’Brien will do, thanks!
Jo Clark Thanks!
Paul O’Brien Powerful take on the evolution of angel investing! Your point about diligence really resonates, especially in today’s threat landscape. I’ve noticed a fascinating trend: startups with robust security frameworks from day one tend to have smoother fundraising journeys and stronger valuations. They’re essentially de-risking their growth story.
The part about “smart money” vs “dumb money” extends beyond operational expertise – it’s also about helping founders build trust-driven businesses that can scale securely. Would be curious to hear your thoughts on how early-stage investors should evaluate a startup’s security posture as part of their diligence process?
Early-stage investors shouldn’t fund security overkill at the expense of speed, traction, and capital efficiency. Security matters, but diligence should focus on what actually matters at that stage.
Stage-appropriate security – A pre-revenue SaaS startup doesn’t need enterprise-grade security. Fit-for-purpose is key.
Risk-weighted trade-offs – Do founders grasp their biggest risks, or are they blindly over-investing?
Regulatory foresight, not compliance theater – Security should serve real business needs, not just check certification boxes.
Founder mentality – Are they risk-aware but not risk-averse?
Security matters, but if it slows growth, it’s a liability. Are too many startups over-prioritizing it before it’s necessary?
Angel investing isn’t just about writing checks, it’s about bringing real value. Too many jump in without understanding the game, and it shows. Smarter capital and sharper diligence are exactly what the ecosystem needs.
Great insights! The idea that many angels invest without true diligence is a crucial point. How do you think independent angels can better equip themselves to add real value? Are there specific strategies or resources you would recommend?
Many angel investors dive in without adequate due diligence, which can be a disservice to both themselves and the startups they aim to support. To truly add value, independent angels should consider the following strategies:
Collaborate with Experienced Investors: Engaging with seasoned investors or joining angel networks can provide valuable insights and shared resources for thorough due diligence.
Leverage Professional Expertise: Utilizing legal and financial advisors can help in assessing investment opportunities more effectively.
Engage Directly with Founders: Building relationships with entrepreneurs allows for a deeper understanding of their vision and operational strategies, which is crucial for informed investment decisions.