Brooke Harley on Angel Investing As Path to Financial Freedom
April 17, 2024
In this Masterclass, Brooke argues that angel investing, along with real estate and public market investing, offers a true meritocracy where good decisions are rewarded irrespective of age, gender, or background.

Brooke Harley is the founder at Campfire Capital & Founder & CEO at Class Rebel. She attended Ivey Business School at Western University. But, she's also on a mission to help women make more money from meritocratic investing opportunities. As she says, "I think learning about stock options can change your life, it certainly has changed mine."

"It's crucial for angel investors to understand deal sequencing, including the stages of startup investment such as pre-seed, seed, and Series A rounds."

Brooke shares how understanding deal sequencing helps angel investors identify opportunities and align their investment strategies with the appropriate stage of a startup's development. Many investor often misunderstand how to effectively navigate the investment landscape. Here's your cheat sheet:

  • Pre-seed and seed stages are characterized by high-risk, high-reward investments in early-stage companies with minimal revenue or beta revenue. These stages typically involve smaller funding rounds, often cobbled together from family and friends, with investments made on convertible notes or safes.
  • Series A rounds represent a de-risked stage where companies have achieved early-stage revenue, usually between $2 million and $7 million.
  • Series B rounds involve larger funding rounds, often attracting a mix of investors, including angels, VCs, and corporate venture capital firms.

Similarly, angel investors often misunderstand the legal terms involved in angel investing. Yet, understanding legal documents is crucial for angel investors to make informed investment decisions. Key legal documents in angel investing include convertible notes and safes. Convertible notes and safes are commonly used instruments for early-stage investments, especially in pre-seed and seed rounds. Angel investors need to comprehend the terms and implications of these documents in order to ascertain valuation caps and conversion mechanisms. A better understanding of these legal documents enables investors to negotiate favorable terms and protect their interests in startup investments.

Additionally, Brooke encourages angel investors to better evaluate stock options. She shares how stock options are not limited to private companies; they can also be negotiated in public companies, often at a discount. Investors should consider taking stock options as part of their compensation package, especially in startups where cash may be limited. Understanding how stock options work and how to negotiate them is essential for maximizing their potential benefits. Investors with valuable skill sets, such as financial forecasting or digital marketing, can leverage their expertise to negotiate stock options in both public and private companies. Brooke emphasizes the importance of learning about stock options, as they can offer significant rewards and contribute to long-term financial success in angel investing.

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