I'm interested in Angel Investing as opposed to VC. Nords (sometimes posts here, most times at www.Early-Retirement.org, and has a blog - https://the-military-guide.com) got me excited about this prospect, but I don't have the time for any private equity stuff, yet.
Thanks for the tag!
Re: Train from $4M to $8M
Is anyone on this fat FIRE train? If yes, do you mind sharing a bit on where you've allocated your capital?
Yep-- due to reaching FI in late 1999 on a high savings rate and an aggressive asset allocation, and then not spending it fast enough over the last 17 years of retirement.
During the last 30+ years we've kept an asset allocation of >90% equities, at first due to having a steady military salary and then an active-duty military pension. ">90%" is a tripwire to make sure we buy into bear markets and economic recessions, and today Personal Capital says that we're actually 98.7% equities.
Most of that AA is in the Vanguard total stock market ETF (VTI). We're shedding the last of our dividend ETF (DVY) through annual sales (0% capital-gains income-tax bracket) for spending cash or by donating the appreciated shares to charity. About 25% of our AA is in the "B" shares of Berkshire Hathaway, and 10% is in angel investments. We'll probably hold on to the "B" shares until we pass them on via probate (or at least until Buffett & Munger step down) and we're drawing down the angel investments as they flame out or exit.
We've chatted with advisors and wealth managers over the years but we haven't found any who we felt were worth the fees. Today I'm happy to pay a fee-only CFP when we have a research project, and I know several firms that I'd hire, but otherwise we're heading toward simplicity and autopilot.
Interesting. I'm about to commit to a private equity fund based on conversations with my banker. How did you find out about your VC fund, was it based on your own research? I've found out that doing my own due diligence on private funds can be very time consuming, and some funds that are more interesting I wouldn't have access to (min $5M commit for example).
The best way to learn angel investing is by joining a group that's affiliated with a national organization like the Angel Capital Association. Educate yourself by reading, working alongside the more experienced members of the group, and asking questions. I've been with Hawaii Angels since late 2007 (thanks to ClifP), and this year I'm bowing out of the monthly meetings to become a "fallen angel".
I've invested in 10 startups and in one of the Blue Startups funds, and I'm hoping to close out this chapter of my investing life during the next decade. (And this time I really mean it!) Five of those investments are still in business and on track for exits (including Blue Startups), although one is struggling. Of the remaining six, one has suspended operations, another has crammed down its early investors to 3 cents on the dollar, and the other four have shut down.
The due diligence on startups is the education part of angel investing, and it's hard work (as well as time-consuming) when it's done right. However it's done more to make me a skilled investor (with incredible mentors) than any other part of my investor education.
A few years ago I wrote a guest post on angel investing for Jim Collins:
https://jlcollinsnh.com/2016/12/13/angel-investing-or-angel-philanthropy/I'd suggest that you do not commit to any private equity fund (let alone a "banker") until after you've read that post. If you think it's a better use of your time to give that sales team your money rather than learning angel investing through your own work with an angel group, then you might as well avoid the PE fees and revert to buying passively-managed equity index funds with low expense ratios.
At an absolute minimum for angel investing you should commit to 10 startups of $25K each with another $250K in reserve for follow-on rounds in the survivors. Your track record would be more sustainable if you could ramp up to 20 startups of $25K each with at least $300K-$500K for follow-on investments.
Until you reach that level then you could try to improve your skills through syndicates on AngelList or other crowdfunding groups. However I find the personal interactions of pitches, due-diligence sessions, and shareholder meetings to be far more valuable than anything done online... and far cheaper than any fund's general partner.