Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 266

Five tips for better startup investing

While angel investing groups have been around for decades, it has become easier in recent years to connect angel investors directly to entrepreneurs using online platforms. As a result, there is less interference, fewer restrictions and bigger opportunities. While many angel investors boast great success stories, there are also lots of ways to lose money.

There are some important steps to making good startup investments. Many angel investors never consider that they play a role in the outcome of their investment. At my company ZipBooks, our initial outside funding was led by a venture capital (VC) firm, but we consciously included angels based on the value they would bring. I’ve seen the process up-close, so I have some ideas about what works and what doesn’t, what’s helpful and what isn’t.

Here are my five top tips for angel investors, because when investors and entrepreneurs work together, the chance of success is so much greater.

1. Look for companies that know how to pivot when it’s time

Pivoting, or changing course in order to take advantage of a better, previously unseen or ignored possibility, is a huge benefit that startups have over big corporations. Smaller businesses are more agile and can pivot with a lot less risk, with upside for reward. Angel investors need to look for businesses that either already have a great track record of being able to pivot, or for businesses with the opportunity to do so right now.

By bringing in a fresh perspective, you may help direct a course down the most-likely path for success. Imagine if you were an investor in Twitter or Slack before they made their big pivot - where would you be today? ZipBooks started with free software before pivoting to a premium model with additional services to drive more revenue per customer. You should only invest in a company that is open-minded enough to consider a pivot. A company too set in its ways may not be the best place to guarantee a return on your money.

2. Be diligent in your due diligence, but within reason

While it’s easy to understand you want all of the information you can get your hands on to make a smart investment, there’s a point in the due diligence process where you can go too far. Although entrepreneurs should be happy to answer questions, pulling at every thread and guessing what might happen will deteriorate the relationship you are trying to build.

3. Take a cue from Shark Tank and invest in people

The Shark Tank programme often features a business that is so-so but they still get a great deal. You’ve also probably seen a great business, one with all the right numbers and a super smart strategy, totally tank. Why? Because savvy investors recognize the power of people. When a person has conviction and determination, when they have a story that makes you listen, when they wake something up in your gut that tells you to trust them - you probably should. People are what make or break businesses. And, when you have a feeling that the person behind a company is someone that is going to succeed, it often turns out that way. Nothing is guaranteed when it comes to investing, but in startups, you can guarantee that if the people aren’t right, neither is the investment.

4. Be involved, but keep your hands off the wheel

As much as I’m sure you love the idea of being the biggest asset to the business, most companies don’t really need all that much help. Lack of capital, which is where angel investors like you come in, is typically the biggest barrier entrepreneurs need help overcoming. So, while you can offer sage advice and unique perspective, don’t become involved in everything that’s going on inside the business. If you’ve made a smart investment, the company really isn’t going to need much of your help.

5. Don’t count on one investment being enough

In order to maximize your investment return, you need to take a diverse approach to angel investing. The most successful angel investors have a portfolio of businesses in case one of the investments turns out to be a dud. While there are always stories of one-and-done successes, the chances are as likely as overnight success or an entrepreneur’s first business being the only one he’ll ever need. If you want to ensure you’re being a smart angel investor, spread your funds around. This means that if you don’t have enough money to invest as an angel in a few different businesses, it might not be the right time now.

 

Jaren Nichols is Chief Operating Officer at ZipBooks. Jaren was previously a Product Manager at Google and holds an MBA from Harvard Business School.

  •   6 August 2018
  •      
  •   

 

Leave a Comment:

RELATED ARTICLES

Private equity’s role in a well-constructed portfolio

Being Jon Medved: three decades of start-up investing

How to invest in early-stage tech businesses

banner

Most viewed in recent weeks

Want your loved ones to inherit your super? You can’t afford to skip this one step

One in five Australians die before retirement and most have not set up their super properly so their loved ones can benefit from all their hard work and savings. 

Indexation implications – key changes to 2026/27 super thresholds

Stay on top of the latest changes to superannuation rates and thresholds for 2026, including increases to transfer balance cap, concessional contributions cap, and non-concessional contributions cap.

Super is catching up, but ageing is a triple-threat

An ageing Australia is shifting the superannuation system’s focus from accumulation to the lifecycle of retirement. While these pressures have been anticipated for decades, they are now converging at scale and driving widespread industry change.

Has Australia wasted the last 30 years?

The 20 years after Peter Costello left Treasury have been deemed wasted...by Peter Costello. The missed opportunities for Australia began long before.  

The refinery problem: A different kind of energy crisis in 2026

The Strait of Hormuz closure due to US-Iran conflict severely disrupted global energy supply chains. While various emergency measures mitigated the crude impact, the refined product market faces unprecedented stress.

3 ways to defuse intergenerational anger

With the upcoming budget increasingly likely to include bold proposals to alter the tax code I’ve outlined three incremental steps with fewer unintended consequences.

Latest Updates

Investment strategies

War can’t be good, can it?

War brings immense human suffering and geopolitical chaos, but historically, equity markets have shown a certain detachment and resilience amid conflict, leading to increased profitability despite initial panic.

Property

Origins of the mislabeled capital gains tax ‘discount’

Debate over the CGT discount is intensifying amid concerns about intergenerational equity and housing affordability. This analysis shows that the 'discount' does not necessarily favor property investors.

Superannuation

Div 296 may mean your estate pays tax on assets your beneficiaries never receive

The new super tax, applying from 1 July, introduces more than just a higher rate on large balances. It brings into focus a misalignment between where wealth sits and where the tax on that wealth ultimately falls.

Investment strategies

There’s more to software than just code

AI-driven fears of collapsing software moats has triggered indiscriminate sell-offs. This has created mispricing opportunities as markets overreact to uncertainty and rising discount rates.

Economics

Europe: A new growth trajectory powered by reform and investment

Europe is undergoing a major transformation driven by security threats, US pressure, and a shift from austerity to growth. EU member states are taking proactive measures to enhance competitiveness and resilience.

Investment strategies

Orbital AI data centers prepare for launch

The new space race is driven by AI as data centers in space offer continuous solar power and reduced environmental impact. Orbital AI aims to speed data processing and ease Earth's resource strains.

Retirement

Little‑known government scheme can help retirees tap into $3 trillion of housing wealth

The Home Equity Access Scheme in Australia allows older homeowners to tap into their home equity for retirement income, yet remains underused due to lack of awareness and its perceived complexity.

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.