Venture Capital/Angel Investment/Analysis/ How to make a smart angel investment The number of angel investors in Europe keeps growing year on year. Do you want in? By Kitty Knowles 24 June 2019 \Venture Capital Friends and family funding screws equality in entrepreneurship By Hattie Willis 25 January 2023 Venture Capital/Angel Investment/Analysis/ How to make a smart angel investment The number of angel investors in Europe keeps growing year on year. Do you want in? By Kitty Knowles 24 June 2019 Angel investors aren’t superhuman. To be an angel investor you don’t have to have stacks of cash or decades of experience. If you’re a woman, or from a minority, it’s possible you’ve not met an angel investor who looks like you. In 2017, just 2.2% of the venture capital investment pot was invested into female founders, and within these figures, less than 1% was invested into women of colour. But this shouldn’t stop you from entering the world of angel investing, from supporting the founders and startups you believe in, and (potentially) making a return. Today we ask five angels from across Europe for their top tips on making a smart angel investment. The number of angel investors in Europe keeps growing year on year. Do you want in? Sarah Turner, cofounder and CEO at Angel Academe. Sarah Turner (UK) Sarah Turner is cofounder and CEO at Angel Academe, which supports 400 angel investors. It has invested over £5m since 2014 into startups like unbiased hiring platform Applied, blockchain firm Provenance, and STEM toy business TechWillSaveUs. An angel investor for 8 years. Number of personal investments: 14 businesses (multiple rounds in many of them) Average cheque size: £15k The biggest misconception about angel investing is… that you need to be super-wealthy to do it. Of course you need to be financially secure but if you invest via a network, individual ticket sizes can be relatively modest. “We need more women investing and more diversity in general.” Do… invest as part of a group alongside experienced investors. Collaborating on deal screening, due diligence and supporting the business post-investment not only shares the load (we’re all busy, after all) but de-risks investing and keeps it fun, which it should be! Don’t… do one investment and leave it at that. Build a portfolio of investments over time. The biggest mistake I made was… waiting to begin investing. I’d been around the UK tech and startup scene forever, but had never met anyone like me doing it, so didn’t think I could — until an opportunity came to me. The rest is history! My personal top tip is to… have a go and enjoy the journey. It’s hugely stimulating. The deal I regret missing out on is… je ne regrette rien! My most recent investment was in… Enterprise Alumni because it stood out as B2B SaaS, it had recurring revenue, a great team, and commitment to 50:50 gender parity on the cap table. And, of course, Emma Sinclair is a force of nature. If I could change one thing about the European angel scene it would be… more women investing and more diversity in general. VCs are starting to change slowly, but the angel market (where most of the early stage funding comes from), is still hugely male-dominated. Paola Bonomo is a member of Italian Angels for Growth. Paola Bonomo (Italy) Paola Bonomo is a member of Italian Angels for Growth, an organisation including 200 angels which has invested €24m to date into businesses like AdEspresso, Musement and Inventia. An angel investor for more than 10 years. Number of personal investments: 27 Average cheque size: €15k individually, €500k with the group The biggest misconception about angel investing is… that it’s for retirees. You can start much earlier! Do… establish a productive working relationship with founders, communicate clearly, be helpful and not intrusive. “Angel investing isn’t just for retirees!” Don’t… do everything on your own. Join an angel group, contribute your skills and leverage other people’s. It’s a much faster way to build a richly diversified portfolio. The biggest mistake I made was… investing in a startup whose founding team was not cohesive and fell apart. My personal top tip is to… remember that an investment is “like a marriage where you hope to have a happy divorce five years later” (Lydia Schroter, Golden Seeds). My most recent investment was in… a biotech company working on better treatments for cystic fibrosis. I decided this was a good investment because of… market size, opportunity for new therapeutic approaches and soundness of the company’s IP. The deal I regret missing out on is… I don’t dwell on regrets, I’d rather spend time on the hunt for the next deal. If I could change one thing about the European angel scene it would be… it’s still many local scenes, with London and Berlin leading and many other hubs growing and maturing. More syndication across borders would be good for our companies and for investors. Nacho Orme Nacho Ormeño (Spain) Nacho Ormeño is cofounder of Startupxplore, a platform connecting over 16,500 investors to investments. €6.23m has been invested into 23 companies, including talent marketplace Yeeply and AI-powered travel tech firm Triporate.x. An angel investor for 5 years. Number of personal investments: 26 Average cheque size (roughly): The average ticket in our platform is €300,000. The biggest misconception about angel investing is… that the next unicorn will be raising funds in a demo day. Do… your own homework (analysis, interviews, calls, references) and then diversify, diversify, diversify. Never put more than 5% of your wealth into this asset. You should invest diversified and build a portfolio of 10 companies at least and make follow on investments in the top performers of your portfolio. “You won’t find the next unicorn at a demo day.” Don’t… invest more than you can afford to lose. The biggest mistake I made was… to rely on entrepreneurs without a basic knowledge of how a company works. My personal top tip is to… give more and expect less. My most recent investment was in… 3D-click because their solution (3DClick Saas platform) reduces packaging and materials related costs by up to 40%. The deal I regret missing out on is… Amazon. In the year 1965 Berkshire Hathaway (BRK.A) IPO prize was $19 per share. In 1997, Amazon (AMZN) went public at $18 per share. If I could change one thing about the European angel scene it would be… tax exemptions to finance early-stage companies across Europe with the aim that investors’ savings will help future entrepreneurs to achieve great success. Abi Mohamed, cofounder of Community Growth Ventures Abi Mohamed (UK) Abi Mohamed is cofounder at angel investment fund Community Growth Ventures, formed alongside three fellow angels. Since its launch in 2017 the organisation has invested £26,000. Its first investment is into natural haircare company Afrocenchix. An angel investor for 2 years. Number of personal investments: Outside CGV I have made 3 personal investments. Average cheque size: £15k-£25k. The biggest misconception about angel investing is… that you have to invest a massive amount in each venture. There are wealthy angels but there platforms such as Crowdcube which gives you the opportunity to invest as little as £10 for some equity in an upcoming startup. “You don’t have to invest a massive amount in each venture.” Do… read and consume content daily via podcasts (Techish, This Week in Startups, 20 Minute VC) or books (Angel, The Invested Investor) to understand tech trends and the current startup ecosystem. Don’t… invest money you can’t afford to lose. Investing is a long game and as an investor you have to be comfortable to wait a few years to see your returns and be comfortable in seeing no returns. The biggest mistake I made was… being obsessed with good user-centric product or service (due to my tech background). This alone isn’t a good indication of a scalable business or even an investable business! My personal top tip is to… surround yourself with other investors as you can always share and learn from each other. Stay curious and ask questions and don’t feel shy about asking deeper questions when assessing a startup — it’s your responsibility to ensure you make the right decision. My most recent investment was in… Festicket, one of the world’s largest marketplaces for music festival experiences. They are solving a real problem in the music and festival ticket space and their online platform is simple and efficient from a user perspective. If I could change one thing about the European angel scene it would be… more women and people of colour investors being represented in the media and conferences. We need to change the current narrative of who can invest. The only way we can do this is by changing the current stereotypes of what an angel or investor looks like because you can be what you can’t see. Mor Assia, iAngels. iAngels (Israel) Mor Assia is cofounder of iAngels, a hybrid VC and angel investment firm with 1000+ active investors. It’s made 65+ investments into companies like automotive startup Arbe Robotics, AI platform WSC Sports, and RV rental service Outdoorsy. An angel investor for 10 years. Number of personal investments: ~15 in VC Average cheque size (roughly): $50k – 100k The biggest misconceptions about angel investing… are because angel investors romanticise investments. Angel investors need to be able to look into the future and take a leap of faith, but most consistently successful angel investors are experts in specific domains and are data and performance driven. Don’t disregard red flags early on. Don’t… be the company’s CEO. The objective is to invest in a strong team, and to empower and mentor them. Founders have everything they own and all of their sweat equity in this single project and it is important to avoid micromanagement. Invest in the teams that have the execution capabilities you expect. The biggest mistake I made was to… disregard red flags early on. It is better to do lengthier due diligence processes and to step out of the honeymoon phase quickly. My personal top tip is to… invest early on in companies that have the potential to be category disrupters. They can make an impact on all of us, move the needle on a global scale, and make a change for the better. As statistically few startups succeed, being a little contrarian when choosing investments is the prerogative of the early stage investor. My most recent investment was in… Theator, a healthtech startup that is leveraging AI technology to enhance surgical performance and reduce surgical errors. Tamir and Dotan, the two founders, are both phenomenal people with deep industry knowledge and the background to be successful entrepreneurs. The deal I regret missing out on was… Fiverr. I have a good relationship with the founders and we tried to find various ways to invest but it didn’t happen in the end. The company has recently IPOd and I couldn’t be happier for them. If I could change one thing about the European angel scene it would be to… increase connectivity and dialogue across Europe. While this may be changing, the angel investing scene in Europe still operates in silos by industry and country. This limits how robust the European angel investing ecosystem can be. Mike Lebus, cofounder Angel Investment Network. Mike Lebus (UK) Mike Lebus is cofounder Angel Investment Network, an platform catering to 205,000+ angels which has backed the likes of bed mattress startup Simba, geocoding business What3Words and kids media company SuperAwesome. An angel investor for 6 years. Number of personal investments: I try to make two personal investments a year. Through the venture division of the company (me and three others), we have a stake in over a hundred companies. Average cheque size: I normally invest £10-25k. The biggest misconception about angel investing is… that investors should be based in startup hubs like Silicon Valley and London. Online platforms and digital networks now allow investors to find great deal flow wherever they are based. Do… take the time to meet and get to the know the founding team. When you invest in early stage projects the idea takes second place to the team. This is because the idea will have to change and evolve to be a success; and it’s the team who are responsible for doing that! “Investors don’t have to be based in startup hubs like Silicon Valley and London.” Don’t… invest in only one company. No matter how good the opportunity looks, there are so many unknowns when it comes to early stage investment. It’s a much better strategy to invest smaller in more businesses. The biggest mistake I made was… to miss out on a great opportunity because I failed to build a good relationship with the team. In the early discussions I should have focused on getting to know them, their vision and their processes; instead, I was too blinkered on the valuation and deal terms. It ended up being a waste of everyone’s time. The company went on to do very well! My personal top tip is to… manage your expectations. If you’re obsessed with returns and timescales, you’ll end up being a burden on your portfolio companies. If you relax and trust the team to execute on their vision, then you can focus on finding meaningful ways to help them with your experience and connections. My most recent investment was in… Sweatcoin, an app that tracks your outdoor steps and rewards you with digital currency. It’s been the fastest growing health and fitness app in history in every country it’s launched in on the App Store. I know the founder well, so knew how talented he was. I also loved the company’s innovative approach to incentivising people to become more active and get healthier. The deal I regret missing out on is… Funding Circle. We helped them with funding very early on, but I chose not to invest personally. Their IPO last year valued them at £1.5 billion! If I could change one thing about the European angel scene it would be… More government incentives to encourage more people to invest into startups. The UK have the SEIS and EIS schemes, which have really helped stimulate early-stage investment. I think more European countries should introduce similar incentives. Bridgitte Baumann. Brigitte Bauman (Switzerland) Brigitte Bauman is founder of GoBeyond early stage Investing, an organisation with 880+ angels who have invested €24.1m (CHF27.3m). It has received €19m in returns through 9 successful exits (Lemoptix, Movu, Sensima and Otosense to name a few). An angel investor for almost 20 years. Number of personal investments to date: 60+ The biggest misconception about angel investing is… that only super wealthy individuals can become business angels. Do… Remember that early-stage investing is a high-risk activity, and a maximum of 10%, or less, of one’s assets should be invested in this way. You can decrease some of the risk via training and coaching — and invest for at least one reason besides making money. “Don’t end up in the ‘Family Friend and Fool’ category.” Don’t… view angel investing as betting on a horse. And don’t invest all your money in one deal and in the first round. The biggest mistake I made was… Invest too much and too fast when I started to be a business angel; I started before I really understood what it takes to be a successful angel: I was in the ‘Family Friend and Fool’ category. My personal top tip is to… use follow-on rounds to decrease risk. Use them to build a portfolio and to allocate 50% of the budget to companies that are growing well. And take a portfolio approach (start with small investment amounts/tickets via syndicates). My most recent investment was in… a wonderful new diagnostic for breast cancer. I decided this was a good investment because of the team, the purpose of the company, their technology and traction AND the co-investors in the deal. If I could change one thing about the European angel scene it would be… low cost, tax transparent syndication tool to build angel portfolios with a small amount and be able to “market” these in an easy way, and banks being more open to working with angel syndicated. Martijn Blom, cofounder of De Investeerdersclub and co-chair of EBAN Impact. Martijn Blom (Netherlands) Martijn Blom is a cofounder of De Investeerdersclub, which links about 30 angels. He’s also co-chair of EBAN impact, the impact investment arm of the European Business Angels Network, and is an active VC. An angel investor for 12 years. Number of personal investments: 15 Average cheque size: 50,000 (in co-investment) The biggest misconception about angel investing is… it’s only about fun, excitement and making money: often it’s downright hard to invest in the (fluid) early-stage companies. “Invest with impact.” Do… thorough due diligence on entrepreneur and companies, be critical on valuation. Don’t… fall in love with the case. The biggest mistake I made was… to trust a (second) cofounder in his judgement of the third, without doing thorough due diligence on that person myself. My personal top tip is… to invest with impact – actively search for the difference you want to make in the world and scout accordingly – while remaining sharp on finance and valuation. My most recent investment was… in a company named “Meet Jack”, that sells meat replacement products produced from Jackfruits. I liked the impact, and knew the founders. The deal I regret missing out on is… LEAPP If I could change one thing about the European angel scene it would be… to create a simple tax-incentive for investments, based on invested amounts, that would make it very easy for government to actually measure the actual funding and deal sizes in The Netherlands. 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