Significant AI Trends for the Financial Industry in 2024 and How to Utilize Them
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Magic 8-ball-of-angel-investing
1. âMagic 8-Ballâ of Angel Investing By Tom Tierney
26 July 2010
Entrepreneurs may sometimes think angel investors use a âMagic 8-Ballâ1 to come to investment
decisions based on which companies are, or are not, ultimately subjects of investment. Angel investors
may sometimes think they might as well use a âMagic 8-Ballâ to make investment decisions based on
the high percentage of failures, versus successes, in early stage investing. Perspective is everything!
In fact, after 10 years of angel investing, I can offer a tongue-in-cheek disclaimer for those entrepreneurs
approaching angel investors (and probably VCs as well):
"CAUTION: Investors may, or may not invest for reasons we have yet to be able to ascertain from
years of empirical data. Don't let a lack of interest, or extreme interest, have any bearing in your
perspective with the chances of failure or success of your enterprise. Consider this an investing version
of the "Magic 8-Ball", where each shake may yield: "INVEST!", "PASS!" or "TRY AGAIN!â. Good luck!â
Letâs run with this: what would comprise an angel investor, or early stage investorâs, âMagic 8-Ballâ to be
used in the startup investment decision making process? Like a regular âMagic 8-Ballâ we would have
red (negative), yellow (cautious) and green (affirmative) choices for the question: âShould I invest in this
company?â Some possible choices for building the âMagic 8-Ballâ of angel investing:
-New market, cannot predict.
-Crowded market, outlook hazy. -Great product, inexperienced - Great team, market and
-Valuation too high, try again team, caution going forward. product, signs point to yes!
later. - Intellectual property hazy, - Successful serial
-Hockey stick revenue try again later. entrepreneur(s), it is almost
projections, don't count on it.
- No barriers to competition, certain!
-Investor indifference, try again
outlook not so good. - Inexplicable investor
later.
-Haven't we seen 10 of these? interest, outlook good!
Our reply is no.
-For vague reasons, our reply is
no.
Yes, sometimes decisions are contradictory, sometimes arbitrary, blame the âMagic 8-Ballâ!
Tom Tierney lives in Encinitas, CA and is a member of Tech Coast Angels (www.techcoastangels.com).
Also see http://en.wikipedia.org/wiki/Tech_coast_angels for more background information on the TCA.
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http://en.wikipedia.org/wiki/Magic_8-Ball