Angel Investors share a few, core characteristics. They’re visionary, they take risks, and they are willing to share their process with those who are just starting out. We are kicking off a series of profiles featuring leading science and technology angels to help new angels hear about how successful angels approach investing in breakthrough startups.

We are honored to kick-off the series with Ellen Chang, co-founder of Lightspeed Innovations–an accelerator for startup and early stage companies in the Aerospace sector–and chair of the Wharton Alumni Angel Network Southern California.

When Chang first started angel investing, there were few opportunities to engage with other active investors. Over the years, though, she has developed an extensive network and also tapped into  online platforms, which broadens her range of investing opportunities.

Propel(x) had the chance to speak with Chang about what she’s learned as an angel investor and what industries she’s got her eye on next.

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Propel(x): Tell us a little bit about your background and how you got into Angel investing.

EC:  I graduated from Penn undergrad and was on a Navy scholarship, so I went into the Navy for eight-and-a-half years, mainly in intelligence. After that, I went and got an MBA at the Wharton School and spent my first couple of years after my MBA in banking and it happened to be during the dot-com boom, which was interesting to watch.

I got my exposure to Angel groups back in 1999. Angel investing wasn’t as popular then, but it did resonate with me. In 2006, the opportunity to invest came up again, and that’s when I got started. Looking back, I would do what I did all over again. As an ex-banker I knew about diversification, but I had an opportunity where I knew the founder with an impressive track record of founding  6 or 7 companies. And my thought was, “Okay great. Here is a wheelbarrow full of money.” That was really my only investment for several years up until recently where I’ve gotten pretty active. Unlike my first investment, I’m not investing large amounts, but more of a minimum of about $25,000. I have a portfolio of about 7 or 8 companies right now. I’m trying to grow my portfolio to about 25 companies. And I am starting to explore some of the online equity opportunities just to be able to improve my access and diversification.

Propel(x): What appeals to you about Angel investing?

EC:  There are many aspects that appeal to me. I really like working with early stage companies and mentoring them, and I tend to be drawn to hard tech, hard science, hence my affiliation with Propel(x). I like working with founders, I find that important. But I don’t necessarily have to be involved with every company. I also know that the returns tend to be higher in the private market, especially in the early stage.  And yes, there’s a lot more risk, but then there’s a lot more reward. And I think with patience, even an illiquid investment will pay off in the future.

Propel(x): Do you have a criteria or process you follow when assessing an opportunity that you’d like to share?

EC: First of all, it has to be in an area that I’m interested in. I might not be an expert–a lot of people invest in what their expertise is in–but for me I at least have to have a real interest in what the company is doing. The other key thing for me are the founders. For those companies I want to be more involved in, I have to have a resonance with the founders, especially when I’m making a larger investment.  I also go after more seed stage companies.

Propel(x): What other characteristics do you look for? And when you say high-tech, science-based companies, are there particular sectors that interest you or that you find your portfolio represents?

EC: The intriguing part for me is some sort of discriminating technology–I always look for that.

I would say the more business-to-business type of startups are my focus. I have a couple of bio-science investments–one is a drug company and one is a company that supports drug discovery, so it’s really a technology. And then on the other side, I have invested in software companies that are focused on space ground systems or drone types of technology companies. So it spans the gamut. I haven’t really done much business-to-consumer. Not that I wouldn’t, because I currently am looking at a company that is a business-to-consumer advertising technology that uses artificial intelligence. Again, they have a discriminating technology that I find interesting.

Propel(x): How do you handle the evaluation process, usually?

EC: I actually run an angel network, so I often leverage what we look for from an angel network’s perspective. We do the secondary market research to understand the market and look at the typical things like the financials, corporate structure and of course, valuation.

Then we really get comfortable with the founder. We go as far as doing reference checks on the founder and try to understand where the founding team is coming from, and that they have a reasonable vesting schedule in place to make sure they stay incented.  We speak to customers and also review customer contracts to understand the terms, the probability of the sales coming through. We also spend quite a bit of time looking at the investment documents to understand our rights. Mine is a holistic approach to the whole effort, and I would say we spend probably 25 to 40 hours doing that due diligence on one company.

Propel(x): Tell me about the Angel network that you run.

EC: I’m the chair of the Wharton Alumni Angel Network Southern California. The Angel network was founded in New York City and has been around since 2008. We started a chapter in Southern California last year and I led that effort, which includes San Diego up to LA in terms of our membership. I know a Bay area chapter is being explored right now as well.

Propel(x): Is there a type of company that your group focuses on or a particular industry or sector?

EC: Not really. The network can act a little bit differently than my own personal proclivities. I would say we run the gamut from entertainment, virtual reality, to some consumer products.

Propel(x): Other than the Angel Group, what other ways do you source your deals and how do you stay plugged in and get in front of the deals you want to be a part of?

EC: Individually, I source deals that I’m interested in by being involved in some of the local or ecosystems that I’m connected with. I live in San Diego and I’m affiliated with UC San Diego, SDSU, and a variety of organizations. Typically, I tend to be active with some of the other active Angels in the area. Another way I source deals is through my alma mater, Penn. Just by virtue of being alumni, I’m connected with the school, and I know about the innovation efforts and launch pads, so I get access to that deal flow.

Propel(x): What advice would you give someone who’s looking to start Angel investing?

EC: As an investor, you have to understand yourself. So, to get started, there needs to be a bit of introspection. Then I would recommend joining a group where you can learn a lot from being around people who are experienced. Because part of it is self-discovery,  I found that people don’t really know what their risk tolerance is, and then they get themselves into emotional trouble. An angel group can help with this because you can learn from other people. If you don’t want to join a physical group then there’s online platforms where you can avail yourself of online group dynamics.

I also speak from a woman’s perspective. When I started there weren’t a lot of individual women, just angel groups. I just had to get out there and join what was available. The women’s angel groups that are now cropping up will hopefully help with the gender gap in angel investing, and for some women it is a safer environment through which to get involved and get active.

There are also learning resources like Portfolia and the Kauffman Foundation, which has a whole series on Angel investing that they have developed.

Finally, I would say that angel investing is a long game, so as you get started, diversify across time as well as industry. New angels get really excited and immediately start investing in a bunch of companies right away. Try to resist that urge and remember to diversify across time.

Also, learn from others but follow your gut since you’ll get conflicting advice. You have to get comfortable with what you are interested in investing in and how much you want to invest. Keep that in mind and start slow.