Episode 18: Louisville Certified Financial Planner Jeb Jarrell announces his involvement as the Director of the Render Capital Angel Network. Angel investing is an option for individuals who are looking for potential returns resulting in their funding of successful start-ups. The returns can be extremely high, but the same can be said for the risk. Jeb will explain angel investing and why it may be an option you should consider.
Render Capital Angel Network
This network is focused on bringing more angel investors to our market. The network offers both an education track and an investment track for its members. The education track consists of 11 modules developed to educate investors about angel investing. The investment track is where prospective investors will have the opportunity to review deals that are available and which are actively seeking investment funding. We’ll discuss this track, later in the episode.
What Is Angel Investing?
Jeb explains that this type of investing focuses on companies that are early in their development and therefore come with a tremendous amount of risk. Some of these companies may still be concepts in need of funding to get started. Others may be farther along, but still, they are extremely risky. However, that high-level of risk can result in an extremely high rate of return, assuming they’re able to avoid bankruptcy and survive. Even for those that do manage to survive, the return may not be a perceived home run. Nonetheless, there may be those lucky few which absolutely crush it. That’s why angel investors are willing to consider the opportunity.
For this reason, diversifying your investment portfolio among these types of opportunities is important. Diversification is still relevant as it spreads that risk among a number of companies. This is a basic concept in most investment portfolios.
Where Does Angel Investing Fit in People’s Overall Portfolio?
Jeb begins by noting that angel investing is very separate from what he does for clients serviced by his firm, Plentiful Wealth. Some clients are interested in learning about and pursuing alternative investments, beyond typical stocks and bonds.
Early-stage angel investing is much different from investing is traditional stocks. They’re related, but different. The valuations, liquidity and returns are different. Interestingly, it may be a way, through diversification, to actually lower the risk on your overall portfolio.
Jeb offers the example of Peter Thiel, who was an early investor in Facebook. He invested $500,000 for 10% of the company. He eventually exited with roughly 3%, but that cut was valued at approximately $2-Billion. This is why people are attracted to the potential rewards realized via angel investing. Obviously, Jeb admits, not every opportunity is going to turn into the next Facebook-level success, but they’re out there.
Can You Stomach the Risk-level?
The vast majority of these companies will either go bankrupt within the first few years, or experience a plateau during which they continue to lose money. Some never generate the yields investors were hoping to reap.
Jeb advises that you have to be willing to lose the investment capital you put up. At the same time, plan on not accessing that capital for 10 years or more.
Ideally, investors are anticipating an IPO or eventual sale of the business. But, they also need to anticipate the strong possibility of a bankruptcy.
Venture Capital Investing
Jeb has previously produced some basic information about venture capital investing. Here as several links to those resources:
What Is the Render Capital Angel Network?
In most cases, if a company is looking to raise capital, you might never know about it. Render Capital is a venture capital firm (“VC”). Companies may approach Render but for a number of reasons, those companies may not fit what Render is looking for. However, they may be able to suggest approaching the Angel Network. This generates “deal flow” for the network. It’s an opportunity for those participating in the network to learn about opportunities to invest in businesses, especially early in the start-up process.
As we briefly discussed, earlier in this episode, there Network also offers members an education track to learn more about angel investing, terminology and how it’s done. Jeb comments that many angel networks don’t offer the educational-side of the equation for their members.
How Often Does the Angel Network Meet?
Beginning in March of 2023, the Network will meet on the 2nd and 3rd Tuesdays of the month. The second Tuesday is the educational meeting and the third Tuesday is the investment meeting.
The Kick-Off is on 2/16/23, at the Render Capital office: 825 E. Market, Louisville, KY 40206. It’s a great chance to meet people and learn about the Network. This is a free event. You can RSVP by sending Jeb an email (Jeb@Render.Capital).
How Much Does It Cost to Be a Member of the Render Capital Angel Network?
The annual membership is $750, but if you join before 3/31/22, you can get a discounted rate of $150 for the first year.
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Thanks for listening!