The One That Got Away: What I Learned About Angel Investing Fees

Hi, it’s Cheryl, founder of Play Money.

Early in my angel journey, I hesitated pulling the trigger on a pre-seed investment in Pressed Roots, The Drybar for Textured Hair.

I loved the founder, the market, and the potential upside. I even loved the lead investor. But the SPV came with a 10% (one-time) fee. 🤯. It seemed so high. Like an idiot, I got stuck in my head and didn’t invest.

I think about that company at least once a month. Last month, that thought stung special. 18 months after I should have invested, Naomi Osaka co-led their Series A.

The moral of the story? Don’t sweat the fees.

You make your money in early-stage investing out of asymmetrical returns. The winners are so significant that they overshadow the losses...and the fees.

What I Wish I Knew About SPV Fees

To note:

• Consumer credit cards charge merchants 3%-5% in fees. Merchants build that into their prices.
• A VC fund charges 20% fees.
  Yep, that 2% management fee is actually “2% per year for 10 years”. Funny how they dropped that from the “2-and-20” tagline.
• If you invest directly on the cap table or via an RUV (a Roll Up Vehicle - essentially an SPV paid for by the founder), similar fees still apply, but they are paid after you invest.

And that doesn't even touch on the "membership" fees many popular high-velocity Angel groups charge even before SPV fees.

$3000. $1500. Free after completing a $ 4,500 Angel 101 course. We've seen it all.

At Play Money, we believe lurking and learning should be free. We'd rather see those membership fees fueling your first investment.