Angel investments on the rise
With the low and often even negative interest rates on bank deposits, and the modest returns on mutual funds, especially when we take into consideration inflation rates and fund and brokerage fees, it’s not surprising that many people are lured into startup investing.
The annual reports of the US Center for Venture Research show that year after year, the volume of angel investments is increasing, as well as the number of angel investors.
The risks of angel investments are much higher than the other options, but the potential rewards also outperform most of the alternatives.
Another trend that is making angel investment popular is the ever-increasing compensation of tech companies, which often results in employees in executive or higher management positions having excess cash from stock option payouts, which they seek to invest.
Becoming angel investors is an attractive option for these employees, not only because of the potentially high returns but also because many of them are working in the startup industry, so they can apply their knowledge in evaluating potential investment opportunities.
Still, it’s a well known fact that due to the inherently high risk of early-stage startups, angel investors must make investments in multiple startups in order to maximize their chances of success: one home run can compensate for 20 or even more unsuccessful investments.
This diversification of the risk through multiple investments into several different startups brings, unfortunately, another big risk, which is often ignored. Let’s take a deeper look at it.
Who knows about your assets if you get hit by a bus?
Many angel investors have difficulty tracking all their investments. It’s a complex matter, anyway, and changes dynamically because of new investments or the situation in existing ones.
If the very owners of these assets have a hard time tracking them, what about their loved ones? Chances are high that if something happens to the angel investors, their family members will have a really hard time even identifying all their investments, not to mention getting hold of the details.
And there is a reason for that problem, which originates in the way angel investors manage the documentation of their investments. Some people use carefully crafted Excel or Google sheets, others stick to good old pen and paper, and some use digital vaults. The problem with all of these methods is that it’s really difficult to share the information with your loved ones.
You might say, “Wait a minute – can’t I just share a link to the Google Sheet with my partner?” Sure, you can. Apart from the obvious pain of organizing all the information on one sheet in Google Drive, what are the chances that your loved ones will remember the link 30 years from now? Or that they’ll get around navigating the pile of files, folders and information?
The problem, of course, becomes even more complicated when we take into account the fact that many families live in different states or even countries – when the children grow up, for example. This makes the transparency around the investments even more challenging.
Can estate planning help?
Many people think that estate planning can help in that situation. The simple reality is that it can’t. The reason is that estate planning serves a completely different purpose. It is meant to ensure that your loved ones will inherit certain assets, but that only happens if they know about them.
Even if you have the best-crafted estate plan, with a catch-all clause for all future assets, it’s of little help to your family if they don’t know what these assets are in the first place and how to identify or locate them.
Estate planning was great in the old days when people had relatively static assets. But it is not well-positioned nowadays when people have very dynamic and dispersed asset catalogs.
Is there really a solution to this problem?
Digital legacy management services emerged precisely to solve that problem. They offer easy cataloging and updating of your digital and financial assets, and a single pane of glass for them.
But most importantly, the best digital inheritance services also offer proactive notification to your loved ones about the assets which you’ve designated to them, in the case of a fatal event happening to you. The services detect fatal events through various means: monitoring your public activities on your preferred social networks, plain old email checkups, and sometimes even through integration with smart wearables.
Once a fatal event is detected through a series of detection layers, the notifications about the assets which you’ve assigned to your loved ones are triggered. This way, your family don’t have the burden of remembering access details or loads of information. They are informed about the assets and given all the information and files that you’ve provided for them, so they can identify, locate, and ultimately claim these funds.
Angel investments are a really great option to maximize your wealth. Protecting these investments through digital inheritance services gives you the peace of mind that this wealth will go to your family when they’ll need it the most.