I understand why people ask this question. We're in a weird place right now - people have reached a point where they are so distrustful of traditional investing, and so exposed to alternative investments. The question seems relevant, and the media seems to be focused on this question. And yet...
In reality, the question is not relevant. I'll try to explain why.
First, if your goal is to make money, if your goal is to turn a profit, and if your goal is to do any of that reliably and predictably - walk away. You are in the wrong aisle, sir.
Angel investing only works if you operate on the assumption that every single dollar you've invested is already gone forever. When you invest in a startup, you might believe in the mission 100%, you might think they have everything going for them, and the stars could be so close to aligning, and it could still crash and burn.
As an angel, your job is not to find an opportunity that you can squeeze a buck out of. Your job is to find a startup you trust, a startup you think are building something the world wants and needs, and then do whatever you can to help them get there.
If you're asking about the safety of the investment, you're already going wrong. Safety doesn't even come into it. There's no safety for the founders. There's no safety for the first folks in the garage who give up stable careers to make something. And there's no safety for you if you back them.
Second, you need to be emotionally ready for this.
Listen. This is an investment in people. And people are by their very nature difficult. They make mistakes. They fall on their faces. They get sick and die. They fuck-the-fuck-up. And all of that has to be okay by you. Your money isn't funding some abstract platform. It's funding human beings who are going to do their best some days, and who are going to be their worst some days.
When you make an investment, you are not just investing in a company. You are putting up your hand to be a part of a team. And you are tying yourself to that company. For better or worse. It's not something you can do passively, it's not something you can do to diversify an investment portfolio. It's a pathway, it's a journey, and you shouldn't start if you have any kind of aversion to risk.
I'm not saying don't invest. I'm not saying don't become an angel. I'm saying the exact opposite. But I'm also saying, don't go into it with the wrong ideas, the wrong goals and the wrong expectations.
It's a startup. It's not going to be easy. That's where the fun happens.