If there’s one thing I’ve had (painful) experiences with, its angel investing. I invested in 15 early-stage companies, and guess what? I lost most of my money.

It wasn’t because the product didn’t work or the technologies failed. Typically, the troubles lay in marketing and the difficulty of getting to scale and breaking even.

There’s a saying in the industry that warns: New ventures take twice as long and three times as much as you project.

Well, it even gets worse than that.

Of the ventures I invested in, the one that had the most potential never made a major sale, partially because the customers were municipalities and they tend to be quite corrupt – giving the sale to Billy Bob who butters their bread with all types of free goodies. It’s also because no one wants to be the first to buy from a new company and risk being the fool if something goes wrong.

Another company I made major investments in kept growing rapidly and making progress, but could never get to breakeven because it had to keep upgrading its software. Management underestimated the scale they needed to be profitable.

All too often, companies believe in their products so much that they spend too much on marketing too early on, without diligent testing. They see it as “build it and they’ll come,” but most of the time they don’t, and companies spend too much on marketing too soon. When they do this, they run out of precious and expensive early-stage funding and then have to pay more to get to the next stage, if they get further funding at all.

My point is…

As potentially lucrative and valuable as angel investing can be, there are simply too many things that can go wrong in the early stage that it’s your funeral if you don’t get it right.

So, don’t just jump in without doing your homework, and then doing more homework, and then more still.

And don’t go it alone. Speak to other angel investors, both successful and unsuccessful. Network. Attend our Irrational Economic Summit in October to listen to Howard Lindzon, who’s an angel investing expert extraordinaire.

Until then, here are two summary tips to apply:

  • Make sure you’re investing in a management team and not just a product.
  • Don’t underestimate the marketing challenges in the early stages, or the funding necessary to get to breakeven and stop bleeding cash.

Don’t become another fallen angel investor. Learn from others’ mistakes and successes.

See you in October.

Follow me on Twitter @harrydentjr

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Harry Dent
Harry S. Dent Jr. studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of his chosen profession that he turned his back on it. Instead, he threw himself into the burgeoning new science of finance where identifying and studying demographic, technological, consumer and many, many other trends empowered him to forecast economic changes. Since then, he’s spoken to executives, financial advisors and investors around the world. He’s appeared on “Good Morning America,” PBS, CNBC and CNN/Fox News. He’s been featured in Barron’s, Investor’s Business Daily, Entrepreneur, Fortune, Success, U.S. News and World Report, Business Week, The Wall Street Journal, American Demographics and Omni. He is a regular guest on Fox Business’s “America’s Nightly Scorecard.” In his latest book, Zero Hour: Turn the Greatest Political and Financial Upheaval in Modern History to Your Advantage, Harry Dent reveals why the greatest social, economic, and political upheaval since the American Revolution is on our doorstep. Discover how its combined effects could cause stocks to crash as much as 80% beginning just weeks from now…crippling your wealth now and for the rest of your life. Harry arms you with the tools you need to financially prepare and survive as the world we know is turned upside down! Today, he uses the research he developed from years of hands-on business experience to offer readers a positive, easy-to-understand view of the economic future by heading up Dent Research, in his flagship newsletter, Boom & Bust.