Above: The Psychology of Money by Morgan Housel.
Lamborghini Vs Porsche
We all think about money differently. What is a lot to me isn’t to you. We all make different choices, and no matter how much I money I have I will never buy a Lamborghini, not even a Miura. I would, however, have a Porsche 911 from every decade since they started making them. That Lamborghini Vs Porsche question is, for me, as easy as it gets.
So when a reader emailed me to ask if investing ‘just £1,000’ into a startup was enough I simply answered, “Yes”. I did also promise more on that answer this week…
Last week I hesitated before hitting publish on that post. I didn’t want to be flippant but I did want to be clear. Angel investing is about taking some of your own hard-earned cash and handing it over to a risky early stage company and the list of reasons a company will fail can be very long.
Yes, £1,000 is a lot of money but if you have the right mindset now and going forward then of course £1,000 is enough — more than enough. I think any amount that makes you take the investment decision seriously (you might lose the whole lot), makes you want to help the company (is it doing something you can help and be proud of?) and gets you excited at the potential of getting many more times your money back (there’s nothing quite like angel investing for the potential upside) is definitely enough.
What’s holding you back?
One of the biggest things holding people back from angel investing is that they think they don't have enough money. They're not a big-shot exited multi-millionaire.
However even if you are a multi-millionaire and you are considering investing then you might also be hesitating. And if you are hesitating then it’s probably not the amount that’s making you stop. It’s not whether the £1,000, £10,000 or £100,000 is enough at all.
The thing that is making you hold back from investing may be included in the ‘Other risks’ part of this post. Those things are the “How will it look?” risks. These are the same hesitations that can hold us back from getting out of our comfort zones in any other area of life. These hesitations are the ones stopping us from doing our best work. If you go ahead with something that’s risky you have to say, “Here, I did this” in a similar way to that which Seth describes in his, “Out on a limb” post*. What you’re doing, or what you’re planning, it might not work.
Most people don’t reach the “wanting-to-do-this-thing-but-hesitating” stage so if you are there then you are ahead of many who wouldn’t even try. And you’re way ahead of those who thrive on potential schadenfreude. Please ignore that lot.
But now that you are there, what can you do next?
Tune up your investor mindset
Imagine turning off that hesitation for a moment. Imagine those few minutes after you hit ‘confirm’ to send your money to the startup company. How will you feel? Hopefully excited. And nervous. Can you convert that nervous excitement into something that will give the company a better chance of succeeding? Here’s what you could do…
Remember why you did it in the first place. You should be making investments you can be proud of and that you will publicly cheer on from the sidelines. Tell the world what you’ve done — be proud of it!
Before you invested you were someone who might be an investor. Now you have invested you’re a somebody who is an investor. You’re an owner so you need to start thinking like an owner. As an owner, start acting like one.
Be confident that the company will succeed and that you can contribute in a big way. Be the most confident, ambitious and supportive investor the company has. You can’t cover all bases but I know people who’ve bought pyjamas, bought curtains, booked holidays and are more organised freelancers because I can’t stop saying how amazing those companies are.
As we heard from Tom Fairy, here, entrepreneurs should be, and in most cases are, immensely grateful for investment cheques of all sizes (and in that episode he told me why he certainly was). You’ve done an amazing thing.
You should enjoy it! Remember I look for companies that are already great that I might be able to help become a bit better. It’s great fun to work with a rapidly-expanding, stretching-the-limits, fast-paced company. As Derek says here, “the standard pace is for chumps”. Embrace the unknown and keep learning.
Take inspiration from others. As Jason says put in £10,000 but act like it was £100,000. Once it’s invested the money is gone (and might be forever) but what you can do is work hard to try and help maximise your return. You could do what Sacca did. He describes (here) that when invested in Twitter it was a credit card cheque because he didn’t really have the money. He says that he just had to get that money back somehow so showed up at the offices day after day to try to contribute (much to the annoyance of Jack apparently).
So while we all think about it differently money is about where you put it, how you think about it and how it makes you feel after you spend it. I remember my Grandfather telling me about occasionally going to posh hotels and restaurants (yes, even up north). He was a nothing-special farmer from Northumberland, but when he had it and fancied a treat he’d walk confidently into a posh restaurant knowing that his money was “as good as anyone else’s”.
Yours is too. Now go act like it.
*Bonus take from the amazing Steven Pressfield on “This might not work” here.
Every week, I tackle questions and topics about Angel Investing that are on my mind and might be on yours. Paid subscribers get the weekly edition and an audio Q&A with a real Angel Investor, everyone else gets an occasional free email.
None of these posts are investment advice. If you are thinking about investing you should seek the advice of a suitably qualified independent advisor.