Angel investing, at any level, is difficult. Whether someone prefers seed or pre-seed investing, data is hard to obtain. Often times, the amount of data available is minimal and what is available can be largely devoid of any trends or indications of future direction.
Without robust data how DO angel investors make decisions? Unfortunately, these complex choices are often based on nothing but how an angel investor “feels” about the founder. While this type of founder-focused decision-making can work at times (approximately 20% of the time), this is not a method for consistent, long-term success. Feelings don’t play into decision-making for any other investment scenario; it should be no different with angel investing, which underwrites some of the greatest risk in the startup ecosystem.
The case for real-time information is supported by the simple fact that founders are too busy and often overwhelmed to be able to provide this data. The angel investment process often takes months for final funding, a period of diligence requires an immense amount of man power for both a startup’s founder and angel investor. Angel checks are also relatively small and in many cases founders grow quite tired of updating those investors. Monthly updates will eventually give way to quarterly updates and at some point, struggling founders will go dark on their investors. A portfolio of any significant size will require even more man power to collect and assimilate data every quarter. These little issues add up to rather large inefficiencies which, if not addressed, eventually lead to quite a weight on the portfolio.
As portfolios grow, the amount of time investors spend with startups grows, forcing them to make key time-management decisions. At some point the amount of time spent sourcing high quality companies dwindles while the amount of time fixing problems sky rockets. This very problem is why the future of portfolio management must be real time.
If angels are going to continue underwriting this level of risk, new efficiencies must be found. Angels must find efficient ways to get data from startups in a manner that isn’t onerous to founders. Solving this single problem increases the chances of success for both founders and investors 10-fold.
Real-time data allows founders valuable insights into company performance on all levels, while affording angel investors the ability to problem solve efficiently and maximize their time in order to continue seeking high quality investments. Founders going dark becomes a thing of the past as their real-time data alerts all stakeholders to potential issues before they truly become a problem. Real-time data also allows automated portfolio crunching, meaning investors can gauge the health of their portfolios in real time instead of 135 days after the fact.
Real time data in startups and angel investing is key to the long-term success of the technology industry. It’s time for both groups to work together to unlock the power of their data in a way that is beneficial for all stakeholders.
