Why Entrepreneurs Make Bad Angel Investors

My optimism usually gets the best of me, and I’m fine with that.

Quite a few years ago, I came to the sad realization that I was never going to be a great angel investor. And for a simple reason: I like every idea I hear.

Obviously, liking everything I hear is not because my deal flow is so spectacular. The law of averages suggests that I should be getting a mix of hits and misses, and as an entrepreneur, I know that the misses are a lot more common. In fact, since I’m not a full-time investor, it’s even more likely that I’m missing out on most of the best deals.

And no, I’m not incapable of saying “No,” either. I do that all the time—just ask my kids.

The simple reason I like every idea is that I’m an optimist. And not just a run-of-the-mill optimist who sees the glass as half full. I’m an over-the-top optimist: the guy who insists on ordering a whole case of extra glasses to handle the overflow.

In my past life as an entrepreneur, this optimism was a critical tool. I just always believed we would succeed. I believed even when everyone else said my ideas were ridiculous. Even when we were almost out of money. Even when the metrics were all upside down. I always had confidence that I’d figure something out, and things were going to work out fine.

The problem, though, is that I have that confidence in every other entrepreneur’s idea too. It’s even more pathetic because I have enough experience to clearly see the flaws in their reasoning and the gaps in their execution. But then I have that moment where I lean back in my chair, stare into space for a second, and say, “Wait a minute…you know, there just might be a way to make this work.” And pretty soon I’m up at the whiteboard, sketching out a possible path to daylight and getting just as excited as they are.

This is not a new realization, by the way: I actually wrote a blog post a lot like this all the way back in 2011, so I’ve known about my “optimism problem” for years. If I haven’t learned my lesson by now, I probably never will.

But while my experience as an entrepreneur might be setting me back as an angel investor, I know that it’s helpful in other ways. Perhaps because of my operating experience, I have a better idea than most of what constitutes a “doable” idea. Or maybe my experience helps me recognize a fellow optimist when I see one.

I have no intention of giving up, though, despite my mixed record. Because the biggest benefit of being an angel investor isn’t the financial return, which is unpredictable at best. It’s having a front row seat to watch other entrepreneurs struggle to make their dreams come true.  And what can I say? I just have that confidence that things are going to work out fine—if not this time, then eventually.

Now where did I leave my checkbook?

– I originally posted a version of this 2011, and to be quite honest, not much has changed since then, but hey, at least I am consistent too!

To find other things I’ve written and much more, check out  MarcRandolph.com