On Monday 26th November, Rod Beer led a lunch and learn session to share ‘top tips for angel investment’ with a group of local investors. The content was both reassuring and challenging for the group, and the conversation certainly suggested that there’s a call for more angel syndicates/groups locally and a need to coordinate dealflow and opportunities more effectively.
Rod introduced his organisation, the UK Business Angels Association as the trade association for angel investing – offering research, roundtables, education, promotion of angel investing as an asset class, connecting across the ecosystem (angels to VCs and so on) and much more besides.
Helpfully, Rod highlighted some recent research with the British Business Bank which explored what factors led to a successful investment – and what indicated less likelihood of success whilst also highlighting the differences between the younger and older members of the investment community. He used this as a framework for the ‘top tips’ that he was able to offer based on his own experience and that of the community of 200 member organisations, you can learn more about the shape of the conversation by reviewing his slides, linked below.
Throughout the session, I captured a few ‘top tips’ to share more widely – here’s my top 8:
- Look carefully at the team you’re investing in – the CEO needs to be phenomenal (switched on, driven, ambitious, able to listen and adapt). Use your gut instinct, take references that haven’t been offered.
- You need industry experience or representation on the team – ideally including some external validation in the form of a lead investor or advisory board member that knows the industry/sector. Look for investments where the lead investor is an industry expert.
- Stress test sales projections – what happens if it takes twice as long to reach x customers? Look for bottom up projections (not a proportion of market share but evidence/experience-based indication). 80/90% of companies go bust due to running out of cash.
- Look for a realistic exit strategy. The UKBAA research found c. 33% of exits are due to trade sale, and c. 42% due to liquidation. Are they driven towards exiting the business with an equity return? And are they structured in a way to support that.
- Take a portfolio approach, the sweet spot is between 15-25 investments. If you can’t invest in volume, you’re not likely to get your returns.
- Expect 70% no return, 20% small return, 10% greater return – the star performers.
- You can actively improve the odds of a good return by getting involved – real angels bring cash plus introductions – to other sophisticated investors and to customers/suppliers – the easiest value you can add.
- Operate with a group – you’ll see more deals (and you need to see a lot) and benefit from more expertise and experience.
Join the Bristol Angel Hub – as UKBAA members you can access the Engine Shed Member’s Lounge and events and insights about angel investment locally. Find out more and apply: www.angelhubs.org
Which groups operate locally? The most active Bristol based group is Bristol Private Equity Club: http://www.bristolprivateequityclub.com/ For other local groups, check out the members directory provided by UKBAA: https://www.ukbaa.org.uk/services-for-entrepreneurs/contact-investors/search-the-ukbaa-database/
If you’d like to set up a new group or syndicate and would like some support, contact Rod at UKBAA
UKBAA E-learning course – If the top tips session peaked your interest, contact me if you’d like a discount code to access this online learning content. https://bizangels.thinkific.com/
Quarterly Investment Briefing – join fellow investors to learn more about the regional investment landscape and to share and network. https://qib4.eventbrite.co.uk If you’re a business founder, looking for investment, find out more about how to submit a one page proposition for the event here: https://www.scaleupgenerator.co.uk/articles/qib-101
Review the slides from the event here: https://scaleup-cosmos-api.herokuapp.com/upload/80fc5026-cb5e-4c7e-8537-26f75bc30c4e