What is an angel investor, and how do you become one in Indonesia?

What an angel investor does

An angel investor is an individual who puts their own money into a young company, usually before it has steady revenue, in exchange for a share of the business. Angels often invest at the earliest stages, when banks and large funds will not yet lend or invest.

Many angels do more than write a cheque. They open doors to customers and other investors, give advice from their own experience, and help founders avoid mistakes they have already seen.

The risk you need to accept

Early-stage investing is high risk. Most young companies do not return the money invested, and the money is usually locked in for years with no easy way to sell. Returns tend to come from a small number of companies that do very well.

For that reason, only invest money you can afford to lose entirely, and do not use funds you need for living costs, debt or emergencies.

How to start

First, learn the basics before your first deal: how to find companies, read a pitch, understand valuation and read the terms of an investment. Second, meet other investors, because deals are easier to judge when you compare notes. Third, start small and decide in advance how many companies you plan to back, since spreading across several investments is the main way angels manage risk.

Talk to a lawyer and a tax adviser before investing. Rules on foreign ownership, taxes and investor protections differ by company type and structure.

Learning with other investors

Angel Investing Foundations is the club's course for people who have not invested yet. You work through sourcing, screening, valuation, terms and portfolio decisions with a cohort, and you can practise on screened companies in a small room.