Social Media Angel Investors
Social Media Angel Investors
Angels Investing in Social Media Opportunities
Social media is a rapidly expanding industry and could be a great chance for angel investors. John Ryan has an interesting post on the opportunities for angel investors in social media. The decline in operational costs for running social media is an important factor for attracting angel investors, as the expenses for storage, processing power and web-based computing continue to lower. Significantly, social media allows start-ups to actively test new products and ideas with users throughout.
Social media, by design, requires little marketing or branding effort because users do most of this work for the start-up through word-of-mouth. It is distinctly hit-or-miss, users won’t put up with a social media product that they don’t like, there are too many alternatives. But the versatility of social media allows a smart start-up to keep trying new ideas until one sticks.
Expansion is only necessary if the product is useful and this is easy enough to find out. If your friends don’t use the product, it probably isn’t compelling enough to warrant expanding to other users. So, entrepreneurs can test the design on their friends, gather feedback and only branch out once they have a worthwhile product. This should be attractive to angel investors who want a well-tested product before they commit too much capital.
Social media may eventually require a large capital input, like Facebook needed to reach its current size. But in the early stages of angel investment, most social media products just need a minor investment to get up and running.
This is not to say that there’s no risk, as the dot-com bubble proved, no start-up niche is invincable. So, working with a team of seasoned angel investors and entrepreneurs is key so that no one becomes dillusional about the possibility of failure. Angel investors, therefore, must contribute more than just capital. Young social media entrepreneurs have to keep their business senses and make sure the model is sound.