They may also send over an unsigned draft of the sheet, which is not binding on them, to get some feedback. But after the real one is delivered with a signature, the company will usually have one to three days to accept or decline the offer. Once the entrepreneur has signed the term sheet, it is binding—not just legally (for at least some parts of

As an angel investor you will do the same thing, but you must be even more ruthless than the Ivy-est of the Ivies. For every investment I make this year, there had better be 40 serious, passionate entrepreneurs sitting on my doorstep, of whom I will only invest in one. That means I need to be three times pickier than Yale, Harvard, and Stanford

Perhaps the best way to develop your reputation as a value-adding investor for startups is to add value to startups. Brian Cohen is now a well-known angel investor (he was the first angel to discover Pinterest), but his initial steps into the field were as a pro-bono advisor. When he first joined New York Angels, he offered to help any of the

Most angel groups and networks augment their members' personal contributions with sponsorship fees from professional service providers, such as law firms, accounting firms, or banks. These sponsorships can run into the tens of thousands of dollars annually. The

Leadership ability. If the entrepreneur is not a ninja-coder-saleswoman-finance wizard, then he or she needs to recruit other people to fill those roles. For a risky startup on a small budget, finding A+ players and then inspiring them to greatness is difficult, and much of the success or failure of the venture will come down to the leadership

But let's be optimistic, and assume an average holding time of six years. If we then take our target IRR of 25 percent a year and run it out for six years, we get 1.25 × 6, or approximately 3.8. That means at the end of the day, after making all our investments, reaping all of our exits, and writing off all of our losses, we should end up with a

Angel investing (like venture capital) follows the classic J-curve. Because unsuccessful companies tend to fail early, and big exits from the successful ones tend to take a long time to develop, when you graph it on a timeline the overall value of an angel portfolio makes a shape like the letter “J.”

As for real angels—the ones investing their own funds—they are probably best described with terms such as active if they make lots of investments, deep-pocketed if they write large checks, well-connected if they can introduce their entrepreneurs to good people, well-known if they have high name recognition, smart-money if they are great strategic

In case you are thinking at this point that due diligence is some kind of arcane, technical thing that should be left to the lawyers, I refer you to a 2009 study by Professor Robert Wiltbank of Willamette University. Rob's analysis showed that angel investments in which investors spent more than 20 hours undertaking due diligence prior to investing