The document discusses 10 common myths of angel investing. Some of the myths include that investors should invest in what they know, focus on making money, and diversify their portfolio. However, the realities are that most successful startups are unexpected, the focus should be on creating value, and investors should make fewer large bets rather than diversifying. The document provides additional tips for angel investors such as not chasing fads, monitoring positive vs negative surprises, and learning from mistakes.

1. The Art of
Angel Investing
FiBAN
September 20,2012
Bill Reichert
Managing Director
Garage Technology Ventures

2. Top Ten Myths of
Angel Investing

3. Myths of Angel Investing
1 “Invest in what you
know.”
Reality: Most winners are black
swans

4. Myths of Angel Investing
2 “Focus on making
money.”
Reality: Need to focus on
creating value.

5. Myths of Angel Investing
3 “The key is good due
diligence.”
Reality: The key is good intuition

6. Myths of Angel Investing
4 “Don’t let emotions
cloud your decision.”
Reality: Recognize your
emotions; don’t deny them.

7. Myths of Angel Investing
5 “Build consensus
among a syndicate of
investors.”
Reality: Controversial
investments do better

8. Myths of Angel Investing
6 “Success comes
from adding value.”
Reality: The harder you work,
the less successful the startup

9. Myths of Angel Investing
7 “Make sure you
protect yourself.”
Reality: Keep it simple; don’t
invest if you are worried about
control.

10. Myths of Angel Investing
8 “Valuation is
important.”
Reality: Shared expectations are
more important.

11. Myths of Angel Investing
9 “It’s cheap to start a
company now.”
Reality: It’s really expensive to
build a successful company.

12. Myths of Angel Investing
10 “Diversify your
portfolio.”
Reality: Make few big bets, and
buy options in several others.

13. Other Tips . . .
• Your influence is not based on the
size of your check
• Buy high, sell higher; there’s no such
thing as a bargain in venture capital
• Don’t chase fads; once a sector is
hot, you are probably too late

14. Other Tips . . .
• Monitor the “Surprise Ratio”: Positive
surprises to negative surprises
• Lower expectations do not result in
higher returns
• Learn from your mistakes; better yet,
learn from the mistakes of others

15. The Art of Angel Investing
Bill Reichert
reichert@garage.com