ENT (640) – Winning Angels: Sourcing

The common theme throughout the sourcing section of the book revolves around networking, connecting with other angels, learning from them, and doing deals alongside other experience angels. In this post, I will approach the sourcing from both perspectives, the entrepreneur perspective, and the angel investors’ perspective.

For entrepreneurs, souring the startup capital in the “seeding” phase is one of the most critical stages of business. If we do not approach this phase with caution, however, we can end up not securing enough funds or asking for too much and not securing any venture capitalists or angel investors. The entrepreneurs should begin the seeding phase with a summary or a description of their business, executive summary, and a reasonable business plan (Feld & Mendelson 2011). Secondly, determine how much capital is needed by generating various financial models like the ones we are building in this class, such as a list of assumptions, income statements, uses of capital, and the balance sheet.

When thinking about angel investors, many new entrepreneurs would think about the wealthy investors that have lots of cash at their disposal. That is, in fact, one group of the angels. However, our friends and family members are also considered angels (Feld & Mendelson 2011). This approach could help source the upfront capital needed to present to the VCs and other angels during the meeting. If the project has no upfront capital and is depending solely on the VCs and angels to fund it from the ground up, it may become difficult to achieve. In any case, a thorough analysis of available options, as well as a complete financial model, should be a great start.

From the perspective of an angel investor, particularly the inexperienced investors just starting, the path to success is rather long and requires lots of time and commitment and involves a lot of risks. In the book, the Winning Angels, the authors present a long list of activities to guide the angel investors in becoming successful. Some of the strategies include networking activities, deal sharing with others, following the leader, and of course, investing.

Throughout the sourcing section, most of the emphasis is on networking activities. At the very start of the process, the angel should invest most of their time identifying the targeted investment type and writing a one-pager on the targeted investments. With the one-pager ready, the angel should be prepared to begin meeting with attorneys, bankers, accountants, and other professionals (Amis & Stevenson 2001). As the process progresses, the angel should join and participate in angel groups, join an angel/entrepreneur matchmaker program, focus on a particular industry, and make an investment alongside other angels. An important point to remember is taking a minority position for the time being and let someone else take the lead role (Amis & Stevenson 2001). All the strategies should generate a very decent pool of investment opportunities that have already been screened by the experienced angels and are ready for action.

Once the angel is ready to invest, they should proceed by co-investing with winning angels. The benefits of this strategy include a higher likelihood of success, a steep learning curve, introduction to other winners, and credibility by association (Amis & Stevenson 2001).

While searching for the winning investments, keep in mind that most of the deals may be failures, and that is perfectly fine. Learn to follow the leader, play nice with others by sharing your deals, and appreciate the referrals others give you. This process is a win-win for everyone and is highly encouraged and appreciated by other angels. Lastly, the angels should share the quality deals with others, not the ones they do not want. Angels flock and share – and for a good reason. If you let me have some of your cake, I’ll share some of mine (Amis & Stevenson 2001).

The next section will focus on the evaluation stage.

Stay tuned!

Amis, David, and Howard H. Stevenson. Winning Angels: the Seven Fundamentals of Early-Stage Investing. Financial Times Prentice Hall, 2001.

Feld, Brad, and Jason Mendelson. Venture Deals: Be Smarter than Your Lawyer and Venture Capitalist. John Wiley & Sons, 2011.


  1. Hi Semir,

    This is a great recap of the Sourcing section of “Winning Angels” and you have reminded me of some passages while also bringing some to light for re-examination.

    For one, your point about remembering that friends and family can play the role of angel investor is extremely important. So often, we think of outside investors as the “big money” we need to take our business to the next level. But there is no “next level” if we can’t get our business off the ground in the first place. I suspect that a thorough evaluation of successful entrepreneurial businesses would find that the majority began with seed money from family or close friends. While going into business with people that you already have a relationship with can be stressful, it is not an avenue to be overlooked.

    I also appreciated you pointing out the importance of humility when considering what it takes to be a successful investor. For example, “taking the minority position” and being comfortable with failure being part of the learning process are extremely valuable lessons from successful investors. Confidence is a valuable asset and something that can be central to achievement as well, but without the counterbalance of humility, the path becomes more difficult.

    Finally, your inclusion of, “If you let me have some of your cake, I’ll share some of mine” made me smile as it was my favorite passage from this section of the book. It’s funny how such a “human” adage of putting out what you wish to get back from others can be so central to “business” success.

    Great post – thank you for sharing your insight.

    1. Hi Trip,
      Thank you for a great feedback. I am glad you found my review beneficial in some way. The concept of angel investing is new to me and I’m certainly learning a great deal from “Winning Angels”. Conventionally, the friends and family have been the go-to source for many successful businesses; I would certainly consider it for my upcoming endeavors. At the present time, and in the near future, I don’t see myself taking the path of an angel investor. However, I would seek an angel network for the future project/business funding after the initial, seeding phase.

      Best regards,

  2. Semir, It seems like the “seed” stage is very important, but probably the more difficult stage to obtain funding. With none or very little history, it may difficult for an investor to see the potential that the entrepreneur sees in the start up. In this case, “friends and family” become an extremely important source of potential financing. This funding is addition to the entrepreneur’s funding, of course.

    Best regards,
    Mike Weimar

    1. Mike,
      Absolutely! We should not discard the wealthy friends and family that have money laying around when we need funding for our business or idea. However, from my experience, it is a bit more difficult to work with people we’re familiar with when it comes to money. I am not sure whether it’s cultural thing or a hurdle across the board. I would certainly start there if I need funds in the near future, followed by an angel investor or a network of investors as a second phase. Thank you for taking your time to reflect on my post. I appreciate your feedback.

      Best regards,

  3. It was interesting to see just how much of the angel investment process relies on networking. I was surprised to see how many angel investors work in teams, and how many of them used relatively small investments at the very beginning. This really eases my mind on the whole prospect. I had always assumed that angel investment worked much like venture capital investments, which required a lot of initial funding. But I really enjoyed seeing the various strategies for starting small and building relationships with other, more experienced investors. It was also eye-opening to see how much work goes into a good investment strategy through researching not only the business proposals, but also the types of industries that you as the investor have an interest in. Not every investment opportunity is right for every investor, and where one person may turn down a proposal they can also share that with someone who is more inline with what is needed. Knowing who to talk to and who to collaborate with can mean the difference between passing on a proposal and green lighting one.

    1. Colby,
      I agree with your point. Frankly, before this class, I was not aware of angel investing so this concept is completely new to me. As I started reading the book I got the impression that angel investors are the investors that drop a lot of cash into start-ups and hope for the best outcome, and not care much about whether they win or lose. However, reading further into the book, I can now appreciate the concept and look forward to working with angel investors in the future endeavors.
      Thank you for taking the time to read my post and reflect on it with great feedback.

      Best regards,

  4. Semir,
    Our book, “Winning Angels” does provide excellent concepts in regards to having a successful business. Of course, it is necessary for entrepreneurs to develop an outline that includes relevant information regarding the business in order to obtain the right investors. It seems that it would be natural that entrepreneurs would develop a proposal that includes information about the company or no investors would commit without knowing all of the details. It is important to network and build professional business relationships along the way when meeting/talking with angel investors as we never know what important information they will have to offer us. Excellent post!

    1. Audrey,
      Thank you for great feedback. You’re absolutely right. When I first started thinking about entrepreneurship and doing preliminary research needed to start a business, many resources I read recommended to write the business executive summary last due to its importance. It is usually the first thing the investors read/evaluate. Our book is a great tool for entrepreneurs to analyze. The book focuses on the angels and it’s written from the angels perspective. One has to evaluate it from a different angle to make it fit our needs.
      Best regards,


  5. Semir!

    I took a similar approach in my reflection as well. I reflected on both sides of an investment: the investor and the entrepreneur. I am an overly cautious person when it comes to money. I don’t play the lottery, I didn’t enjoy Vegas because I don’t enjoy gambling, and I most likely will not “play” the stock market because it’s not predictable. Investment can have the same risks, but not all the time. There are still variables in investment that can be controlled. Your point about caution when choosing investors is so important! Sometimes investors want more than they deserve. If an entrepreneur isn’t careful, they will agree to investment terms that will be hard to undo in the future.

    Great reflection!

  6. Semir,
    you did a great reflection on our sourcing chapter. I enjoyed that you touched on the idea of friends and family being angel investors as well for a startup. Its a nice thought to rely on these people to join a startup, but I also feel it should be something that is a last resort. I feel as if having an emotional connection with an investor can complicate your business life and personal life. I have seen where family members or friends will try to take over their love one’s business because they see themselves as a full owner of the business because they have money invested in the business. They do not see the business side that they may only own a very small percentage and do not have total control over the business. I would recommend anyone having loved ones invest in the business to have an air tight contract to go with it.

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