Angel Investing: The Gust Guide to Making Money & Having Fun Investing in Startups

by David S. Rose, Reid Hoffman (Foreword)

They deliver more capital to entrepreneurs than any other source. And they often receive an incredible return on their investments. They’re angel investors, some of the most important—and least understood—players in business today, whose investments in startups exceed $20 billion per year. Many, if not most, of the world’s largest companies were originally funded by angels—companies like Apple, Microsoft, LinkedIn and Amazon.com.

But until now, little has been written about these angels, due in part to their preference for anonymity. ANGEL INVESTING: The Gust Guide to Making Money and Having Fun Investing in Startups by David S. Rose provides an inside look at who these angels are, how they operate, and how anyone with six figures to invest can potentially generate annual returns of 25% while funding tomorrow’s industry leaders…and having a lot of fun in the process.

In the past few years, angel investing has moved from an arcane, tiny backwater of the financial world to a business arena that receives coverage in mainstream newspapers and smash hit television shows such as ABC’s Shark Tank. Every year angels invest over $20 billion into startup companies in the US alone (and double that amount worldwide). Historically this been a virtually random activity, but over the past several years angel investing has begun to be recognized as a legitimate part of the Alternative Investments asset class.

With a foreword by Reid Hoffman—co-founder of LinkedIn and a prolific angel investor himself—together with hard research studies and a host of stories from his personal experience as one of the world’s leading angels, Rose explains in this book precisely how angels and venture capitalists differ, describes proven ways for entrepreneurs to attract them, and provides all the relevant resources for investors to enter into the world of startup funding.

Rose tackles all the challenging questions that have long confounded angel investors and the entrepreneurs seeking to attract them:

• Who can be an angel…and who should be an angel?
• Where do angels find hidden startup gems before the public hears about them?
• How should an angel build a portfolio that can return 25% annually over a decade?
• What is it like to lose all of an investor’s money? And, conversely, what does it feel like to invest in a failed startup as an angel investor?
• What are some common mistakes that inexperienced angel investors make?

Successful angels know that investing in entrepreneurial ventures is more than just providing money. ANGEL INVESTING is the first complete, up-to-date guide to the subject, including what angel investing is, how one gets started, how to find deal flow, evaluate opportunities, negotiate terms, join an angel group, structure investments, and work with venture capital funds.

ANGEL INVESTING includes tools, tactics, and strategies for high-tech, low-tech, and every other kind of early-stage investing. Rose opens the doors to those angels who have limited experience, while augmenting the experience of seasoned investors. Entrepreneurs will gain access to the mind-set of winning angels, and learn how best to win them over, as well as finding information on how to value, structure and bring their companies to a successful exit.

The combination of advancing technology, changing federal regulations, rapidly dropping startup costs and new online investment platforms means that it is now possible for any serious investor to undertake angel investing the right way—and that is what the book ANGEL INVESTING is all about.

ABOUT DAVID S. ROSE:
David S. Rose is an Inc. 500 CEO, serial entrepreneur and angel investor who has founded or funded over 90 pioneering companies. He has been described by Forbes as "New York's Archangel", by BusinessWeek as a “world conquering entrepreneur”, by Crain's New York Business as "the father of angel investing in New York", and by Red Herring magazine as “patriarch of Silicon Alley.”

PRAISE FOR ANGEL INVESTING:

"As an angel investor and a long-time fan of David S. Rose, I was delighted to hear he finally captured his wit and wisdom in the pages of a book. David is a born teacher — clear minded, witty and provocative, with amazing stories to illustrate every key idea and insight. Those gifts — as well as his unsurpassed knowledge of his field — are teaching me so much more about investing than I've learned over the years doing it! Read every page of Angel Investing."

Barbara Corcoran
Real Estate Mogul, Shark Tank star, Angel Investor

“From the secret economics of angel investing and the best methods for finding and picking tomorrow’s big winners to proven techniques for adding value to any business you invest in, Angel Investing provides readers with everything they need to know to get started in this fascinating, fun—and lucrative—business arena.”

David Bach
#1 New York Times bestselling author of The Automatic Millionaire and Start Late Finish ...

Genres: Business, Finance, Startup, Entrepreneurship, Nonfiction, Economics, Money

283 pages, Hardcover

First published January 1, 2014

About the author

Librarian Note: There is more than one author in the Goodreads database with this name.

Reviews

[David Rose · Rating 5 out of 5]

I obviously loved this book—because I wrote it! But I hope that you will as well. It is the first real "how to" book that covers angel investing as a professional alternative asset class, walking prospective angels (and the entrepreneurs who seek investments from them) through the entire angel process: identifying companies, evaluating entrepreneurs, negotiating term sheets, adding value to portfolio companies, helping with exits, and everything else in between.

The book is based on over a decade of my own investing into more than 90 startups, with exits to Amazon, Facebook, Intel, Google, CBS, Kodak and other big name companies. In that time I've heard thousands of pitches, co-invested with hundreds of other early stage investors, founded the nation's most active angel group, and developed the global platform for the organized angel investing industry. During this period I've seen angel investing morph from a hobby of the rich and famous, to a serious investing alternative for the "mass affluent", and my goal with the book is to help others assimilate many of the lessons that it's taken me a long, hard path to learn.

If you're considering getting this book, let me give you a few links that will tell you a bit more about it:

Here is where you can order the book online
Here's where you can pick it up in person"
A free digital interactive sampler of the book
The interactive sampler in cool iPhone app
A big article from the New York Times about it
A FOXBusiness interview of me discussing the book

If you have any questions, whether about the book or about angel investing in general, I'll be happy to try to answer them!

[Andrew Yang · Rating 5 out of 5]

This book is practical, informative, entertaining, and a window into a world of startups and entrepreneurship that too few get to experience firsthand. Beyond the insight into what it means to invest in an early-stage company or attract investment, the reader gets a sense of what it actually takes to be a successful angel or entrepreneur. Offers plenty of concrete guidance, highly recommended for anyone with an interest in how companies get off the ground in the real world.

[João Del Valle · Rating 5 out of 5]

With decades of experience as an angel, the founder of Gust David Rose is the authority to talk about angel investing. From why to how, passing by topics as motivation, deal formats, typical terms, legal aspects and angel communities.

[Vijay Chengappa · Rating 3 out of 5]

Approached it with high expectations. It covers basic angel investing concepts and a round up of terms and structures. Very basic primer. Also might add that since most of his observations are centered around the US market, non US readers may not get many takeaways here.
If you've already followed him on quora, you won't find much else that's new.

[Thiago Marzagão · Rating 4 out of 5]

This is a great companion book to Jason Calacanis' Angel. Calacanis' focus is on how to get your dealflow going and on how to pick your deals, whereas Rose's focus are practical topics like valuation, due diligence, and financial instruments (equity vs convertible notes vs SAFEs).

My one gripe is that Rose spends a good chunk of the book advertising his own angel investing platform (Gust). Also, like Calacanis' book, this one also needs a revised edition that adds a chapter on platforms like Republic and Wefunder that cater to non-accredited investors.

[Sanger Yoo · Rating 4 out of 5]

Super easy to read without coming off as condescending. An excellent introduction to seed round investing for both aspiring angel investors AND entrepreneurs.

[Tõnu Vahtra · Rating 4 out of 5]

When reading the definitive books about angel investing I hope to find something that I'm missing while trying to demystify angel investing but it seems that there isn't that much general theory you can find and the main things to accumulate are experiences and networking reach. This book has less "character" compared to Jason Calacanis book but is still a comprehensive overview on angel investing. It is also primarily focused on US but you still find plenty of general principles from there. Off to gathering more experience...

[د.أمجد الجنباز · Rating 5 out of 5]

مرجع متميز ومتكامل عن الاستثمار الملائكي. وهو مفيد لرواد الأعمال ليفهموا وجهة نظر المستثمر الملائكي وكيفية التعامل معه

[Jennifer V. · Rating 5 out of 5]

With the growing number of technology start-ups and the popularity of reality television shows like the Canadian Dragon’s Den and it’s American spin-off Shark Tank, terms like “angel investor” and “venture capital” are becoming household words. However, how to actually survive and thrive in this sort of investment market is still a great mystery to many. For those looking to fund these sorts of high-risk businesses, help is needed. And that’s exactly what Angel Investing: The Gust Guide to Making Money & Having Fun Investing in Startups offers.

Author David S. Rose is a veteran angel, founder of the New York Angeles investor group, and CEO of the online platform Gust, which connects moneyed members to entrepreneurs. In Angel Investing, Rose shows the novice the ropes, covering basics such as the differences between equity investment and lending; and among accelerators, angel investor groups, and venture funds. Readers will learn how to evaluate an entrepreneur’s potential, what to realistically expect from their portfolios, and how to be actively engaged in a business without becoming a nuisance. Rose also discusses what to expect in case of an acquisition, where your company is bought out by another one, and bankruptcy, where your chances of losing your entire investment is high. I particularly liked the author’s warning against trying to maximize financial return and social impact simultaneously. While it’s a nice idea that we could make money while being “do-gooders,” Rose points out that each project needs to focus on one goal.

Sounds good so far? Well, for those who would rush out and buy this book as a sure-fire way to getting rich, I want to add two words of caution. First, this book was written for Accredited Investors (i.e., people with mega-bucks who are permitted by the government to blow large amounts of money on start-ups that will in all likelihood fail). So you might be thinking, “What’s in it for the Average Joe?” Well, most of us at some time or another have been asked – or will be asked – to participate in a “Friends and Family” investment round. Now, armed with this book, you can learn to think like the multi-millionaires and billionaires and critically evaluate a business’ potential before dropping your life savings into your nephew’s big idea.

Second, angel investing is definitely more of an art than a science. It’s not a given which firms will be successes and which ones failures. (Don’t believe me? Check out the Apple chapter in the documentary film Something Ventured.) Most of the statistics are “guesstimations” based on Rose’s experience, not backed by hard data, nor expected to ever be. He talks about what generally happens, what entrepreneurs usually do, what problems often arise, etc., and builds his recommendations from this. But few things, aside from a few laws, are really set in stone. While it might seem like I’m being a “party pooper,” note that this is reality for any kind of investment or speculation – including Bitcoin, people! Angel Investing won’t eliminate risk, but it can teach you how to be a better informed investor.

Disclaimer: I received a copy of this book as a First Reads giveaway winner on GoodReads.com. There was no obligation to write a review.

[Kristen · Rating 5 out of 5]

Full Disclosure: I won this book in a Goodreads Firstreads Giveaway.


David S Rose is passionate about angel investing and his passion comes through in this book! Angel investing is when individuals invest their personal capital in early stage companies. Investing in a startup company is a high-risk, but potentially high-return investment. While angel investing is primarily the province of accredited investors (those people with at least $1 million in assets excluding their primary residence, or those with annual incomes of over $200,000 per year)some recent legislative changes has opened up opportunities to those with lesser means. The author is very explicit that MOST startups fail and that you should expect this, but he maintains that with a well-constructed portfolio of around 20 carefully chosen companies you should be able to chose enough winners to more than offset the losses caused by your losers.

Rose walks you through the pitfalls and rewards of angel investing and provides some guidelines about how to select and manage an angel investment portfolio. He outlines the entire process from selecting investment opportunities, negotiating investment agreements and what to be aware of after the investment, to payoffs or exits after the company is a success. There are also appendices that include a valuation worksheet, due diligence checklist, several sample term sheet templates and additional resources.

Rose is the founder of Gust, which is an internet platform for startup and early stage funding used by investors and entrepreneurs. The book does reference Gust a number of times as a resource, but the book does not come off as a large advertisement for the site.

If you have considered this asset class (early stage companies) as an addition to your investment portfolio, you will enjoy this book. But be aware that David is so passionate about angel investing that you will most likely find yourself becoming excited about it too!

[Sheldon · Rating 5 out of 5]

YES, YES!!... Here is a book with solid, actionable advice and information about Angel Investing. Unlike many books that give high level "success stories" and basically say that's how you do it, David lays out the industry, things you should consider, things you should expect, and is real and honest about what you'll likely experience both in results and people.

I listened to the audio book version on a long flight back from the west coast (almost perfect length for that). David is the reader of the audiobook as well, which is my preferred method for most books. He doesn't come across as obnoxious, bragging, or a "know it all" in the book, but as a person sharing his lessons learned. Lots of info, not a lot of fluff and patting himself on the back kind of stories. Perfect

Obviously, by the title, David does do a fair bit of plugging his business / website "Gust" but I didn't mind because he used it more as a "here's where my business can help you" vs. "go to my site to get all the information you thought you would get in the book" (like some authors will do). He also talks about several other sites, other VCs, Angels and financiers in the game, gives examples of what they have done, how they have been successful, etc.

I'd recommend this book for both investors and entrepreneurs.

[FAIZAN KHAN · Rating 5 out of 5]

This Book Codifies & Explains The Current Best-Practices In Professional Angel-Investing.

This Book Also Teaches You How Angel-Investing Would Be Amazingly Rewarding Both In Terms of Financial & Non-Financial Rewards.

Regardless of Whether You Are a Multimillionaire Super Angel or a $2,000-a-year CrowdFunder,
Internalizing The Underlying Lessons In This Book Will Be Equally As Vital When It Comes To Generating Long-Term Results.

Angel-Investing Plays an Important Role in:
Launching & Nurturing The Businesses That Will Shape The World of Tomorrow.

[Vicky · Rating 5 out of 5]

This book offers excellent and practical advice for people interested in becoming successful entrepreneurs. This easy-to-read book explains what to consider and what to expect in your quest to make money and have fun. I would highly recommend this book to anyone interested in investing in startups.

I received this free book through Goodreads.

[Nathan · Rating 4 out of 5]

This is a great, very informative read about angel investing for those interested in starting. I gave it 4 stars because it wasn't mind blowing or anything, but full of good information.

A few takeaways:
- Biggest claim he makes is that you can make 25% IRR on your investments if you invest seriously, in a portfolio of 20 startups, have a 10 year horizon (or so), and stick to things in your expertise / areas of domain. I've heard lots of horror stories and he admits the data is tricky to collect, so take this with a grain of salt. To me your return as an angel probably really is determined by luck + your network, but the things he mentions do make sense to me.
- You'll need follow on capital. Serious angels keep money for follow on rounds and this is important as you can get forced into bad scenarios without this. I didn't completely get all of the details but shares can get diluted so for example an entrepreneur could say they'll convert your shares to a more diluted type (e.g. preferred to common) if you don't invest again. This sounds shady but I bet there's more legit reasons too for follow on capital (e.g. it's doing well and you can make more).
- Convertible notes with caps sound like the way to go as an angel, where you get converted to equity at a cap valuation so you gain extra benefit compared to the next round if the valuation is over the cap.
- $25k checks seem like the amount he implies are good amounts for serious angels, $10k may not be enough he claims but I'm sure it varies tons.

[Edward · Rating 5 out of 5]

David Rose gives a comprehensive guide about angel investing, covering all aspects, from the reasons why one would pursue a "career" in angel investing, to the nuts-and-bots of dealing with term sheets and leading an investment round. I found his writing very readable, guiding the readers from the very basics to the details (e.g. the different way to value a start-up).

David Rose is a very successful and experience angel investor but his writing style is quite humble and never condescending. At the end of the day, he let the readers decide whether this is right for them.

I have been an entrepreneur during the late 1990's, and as part of the founding team, gone through fund raising. Now, many years later, I am starting out to learn to become a part-time angel investor. I found the content of this book very valuable for me to get up to speed in angel investing and be a discipline investor.

I also enjoyed reading Jason Calacanis' book - Angel: How to Invest in Technology Startups—Timeless Advice from an Angel Investor Who Turned $100,000 into $100,000,000. Calacanis' book is more about his personal experience and lessons on angel investing in Silicon Valley and is very inspirational. This book is a comprehensive guide and provides a more objective view and information about angel investing.

[Pedro Emboava · Rating 5 out of 5]

O melhor livro sobre Investimento Anjo com o qual já me deparei.

Se você achou que "Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups" seria mais um daqueles livros cheios de jargões motivacionais e promessas de enriquecimento rápido, prepare-se para uma surpresa. David Rose, o autor, não só sabe do que está falando, como também consegue transformar um tema complexo em um guia prático e acessível. Este é, sem dúvida, o melhor livro sobre investimento anjo que já tive contato. Rose desmistifica o processo, oferecendo análises claras e conselhos que vão desde a seleção de startups até a gestão de um portfólio diversificado. Se você quer entrar no jogo dos anjos, este é o seu manual de sobrevivência.

Agora, se você está pensando em investir em uma ou duas startups e esperar para ficar rico no próximo ano, é melhor repensar sua estratégia. Rose é categórico: investimento anjo é um jogo de paciência e comprometimento. Ele recomenda um horizonte de médio a longo prazo, com investimentos consistentes ao longo de cinco anos e um portfólio de pelo menos 20 empresas. A ideia é que, enquanto algumas startups vão falhar (e vão, acredite), outras vão decolar e compensar as perdas, gerando um retorno médio de 26% ao ano.

Por fim, Rose nos lembra que ser um investidor anjo não é só sobre dinheiro – é sobre construir relacionamentos e apoiar empreendedores com potencial para mudar o jogo. Ele enfatiza a importância de fazer a lição de casa: analisar o mercado, entender o modelo de negócios e, claro, conhecer a equipe por trás da startup. Afinal, investir em pessoas é tão importante quanto investir em ideias. Então, se você está disposto a encarar o desafio e tem estômago para os altos e baixos do mundo das startups, "Angel Investing: The Gust Guide to Making Money and Having Fun Investing in Startups" é o livro que vai te guiar nessa jornada. Só não esqueça de manter as expectativas realistas – e talvez um pouco de fé, porque, no fim das contas, até os anjos precisam de um milagre de vez em quando.

[T. Laane · Rating 5 out of 5]

This book is like from the grandpa of Startup investing - in a good way. Having tons of experience, being friendly and charming - AND is the founder of the biggest startup/angel investor platform (Gust.com). I really like the integrity level on this guy, he often recommends “if you ever get a slightest feeling that the person on the other end of the table is not 100% honest, then stand up, turn around, walk away and NEVER look back”. It’s true - we have to be very careful who we allow to enter our lives. And it IS possible to set up a network of 110% honest people that really want to help everyone. It just takes a lot of “NO-s” in the processes. This book took me a bit more time to get through - this means it is full of heavy content and I did not want to rush :)

[Jason Sun · Rating 3 out of 5]

I listened to this on audible. It wasn't very engaging and I have trouble finishing. Not really suited for the listening type, maybe as a reference.

I lost appetite about 70% of the way through. Lost some points because of advertising for his platform, gust. I wanted to hear about his discussions of what startups he invested in and why what he missed out on and why. But all I got were principles of what to do and what not to, and not the stories I was hoping for. As for gust, I guess since he was an investor, he was going to pitch about it in his book.

[Brad Bevers · Rating 5 out of 5]

Great advice on investing in individual companies. Hard numbers and tips on evaluating companies when you don't have all of the documents required for public companies, pitfalls to look out for, what kind of companies you should focus on, portfolio diversification, and a lot more. Great book and one that I will reference in the future, plan to go back through soon and pull out additional notes. If you are invested in investing in companies before they are public, this one is a must read.

[Vaibhav Bhandari · Rating 5 out of 5]

David Rose is a seasoned angel investor and its a good read & listen to understand his perspective of the Angel world. As an angel investor and an entrepreneur, I like the actionable insights from this book especially the ones around using SAFE, structuring cap tables and creating a portfolio. More examples would have helped but none the less it is an interesting and educational read.

[German Diaz · Rating 5 out of 5]

Buen libro

Temas importantes sobre ética empresarial, conocimiento fresco sobre negocios, muchos consejos prácticos.
Lo recomiendo para emprendedores,empresarios e inversores.
Cómpralo,la inversión lo vale.

[Eric · Rating 4 out of 5]

A great primer if you've never invested in startups as an angel and are considering it. The book could use a stronger editor to make things more concise and less repetitive. Overall though, it's a solid book that gets you up to speed fast.

[Peter Fuller · Rating 4 out of 5]

Super duper practical and straightforward. I learned a ton about the world of startups and private equity investments. Unfortunately, I don’t have $500K in annual free cash flow and likely never ever ever will. But still interesting!

[Artjom Ml · Rating 3 out of 5]

Good basic overview of Angel investment life with insightful statistics on early stage investments :
50% fail completely
20% return initial investment
20% return 2-3x of the investment
9% return 10x
1% return more than 20x
75% off startup should not be invested in at all

[Jonas · Rating 4 out of 5]

Great book for anyone that wants to become an angel investor. A little too focused on US companies but overall a solid read.

[Bob · Rating 4 out of 5]

It's a very interesting read for an entrepreneur wannabe, as well as start-up investor wannabes. The book is mostly written for future investors, but is also helpful to entrepreneurs.

[Guido · Rating 4 out of 5]

Good insight on how angel investing actually works. It was full of financial terms but not overwhelming and the author did an excellent explaining the rational to angel investing.

[Sumaia · Rating 5 out of 5]

Simple, clear, and to the point. Great information about angel investing and investing in startups in general.

[Mark Greathouse · Rating 5 out of 5]

An excellent overview of early-stage private equity (angel) investing. A must primer for new investors and entrepreneurs.

[Leland Richards · Rating 5 out of 5]

Mandatory reading for new angels

Yes, it is a promotional piece for Gust, but it is an excellent source for the gritty details of angel investing.