When it comes to investing in startups, investors are not only evaluating the potential of the business idea but also the qualities of the founders behind it. Startups can have an innovative product, a large market opportunity, and a sound business plan, but without the right team behind it, success can be elusive. This is even more the case in 2023 with investment more difficult to secure.
Based on several interviews with prominent angel investors, we explore the key traits that investors look for in startup founders. From passion and grit to adaptability and communication skills, we delve into the qualities that can make a startup founder stand out and increase their chances of securing investment.
The life of a startup is exciting but also tough and this past year has seen a combination of challenges. Many tech firms’ valuations have been radically reduced and we have a more difficult funding climate with investors having more strenuous criteria in the startups they back.
Many founders are needing to change plans quickly, look at longer runways andmake really difficult decisions on staffing. All the while working harder than ever to raise funds. This can create real pressure and have a negative impact on mental health.
So how can startups support their mental health during challenging times? We spoke to a leading psychologist working with startups and several successful founders in our network to get their top tips and advice.
In June 2022, MASTER Plant Holdings (“Master Plant” or the “Company”), an emerging force in the European cannabis industry, raised £500,000 in a seed funding round with Angel Investment Network (AIN), the world’s largest online angel investment platform.
Following this investment, Master Plant will aim to licence and redevelop a pharmaceutical distribution facility in Guernsey designed to develop high quality medical cannabis, unique strains and wider products for European distribution.
The European cannabis market is rapidly growing with Germany leading the way. Currently, the market exists via medical channels with limited psychoactive THC quantities (Cannabis Light). In fact, 89% of cannabis use cases involve this product for medicinal and therapeutic purposes. The European market is predicted to reach €13bn by 2027 according to Market Data Forecasts. In comparison, the United States market was estimated at approximately $65bn in sales in 2021, of which $21bn were from legal sources creating $4bn in tax.
After the first £500k round of funding, Master Plant is intent on remaining ahead of the curve. The Company is in the process gaining their cannabis licence for research, development and manufacturing of 300+ strains and formulations on the Island of Guernsey. Already, the company has consolidated decades of research and development into its proprietary cannabis genetics bank. This research will provide diversity in major and minor cannabinoids, as well as other beneficial molecules that will contribute to a vast assortment of future products. The licensed facility is set to distribute high quality medical cannabis, launch unique strains and products and develop deep tech enabled growth.
AIN’s funding will also enable the expansion of Master Plant’s senior team with seasoned experts joining from the North American cannabis industry. The commercial operations of Master Plant and Mee CBD, with groundbreaking water-soluble formulas, will also see wider development.
According to Master Plant CEO, Oliver Osgood: “We are delighted that angel investors have backed Master Plant’s vision as we continue to break new ground in the cannabis industry. As we look forward to the future, we are confident our cannabis licence and market proposition is unique. Combined with our proven track record and global cannabis credentials we are ambitious to become a key player in European cannabis.”Master Plant will aim to launch their next round of Series A funding in 2023. The £2m Series A funding will go towards retrofitting the Guernsey facility and developing commercial operations. Sign up for further updates here.
A pioneering Australian payment platform for hospitality called Payo has been named as AIN’s Startup of the Month. The platform was singled out from close to 150,000 startups currently raising on the AIN platform for having ‘a winning formula’ as an investable proposition. The business was given the accolade after a judging process involving AIN’s expert panel, combined with a high number of connections from investors.
Payo is a payments and software solution for small and medium restaurants. It solves the problem in hospitality of venues needing to use 4-6 different payment systems with an all-in-one solution enabling venues to make payments more simply and cheaply. The Payo founders came up with the idea following more than 10,000 conversations with venue owners and operators over the past decade in various roles.
Startup of the Month is a new initiative from AIN to champion and celebrate businesses on the platform with great potential and to help raise their profile. In showcasing these startups, AIN’s aim is to highlight the qualities of investable businesses to inspire and educate others. The team at AIN were impressed with Payo’s innovation, clear evidence of traction and experienced founding team.
The Payo team are looking for funding to complete the front and back end development of the platform, as well as supporting sales efforts to further growth. The startup has more than 1,000 venues signed up so far.
According to Mike Lebus, co-founder of Angel Investment Network: “AIN is the world’s largest online angel investment platform and Startup of the Month is about showcasing businesses that have a winning formula to gain investor interest. Payo demonstrates that in spades, with a solution to a real world problem for many smaller hospitality businesses, genuine traction and an experienced founding team. We hope other startups seeking funding can learn from what they have achieved and we wish Payo well on the rest of their fundraising journey.”
According to co-founder and CEO of Payo, Taf Chiwanza: “I’m extremely grateful to AIN for this recognition. It is testament to our hard work and the problems we are solving in the hospitality industry. A lot of the problems we are solving are certainly not just an Australian problem. This is a global challenge and we look forward to scaling this and helping restaurants save time and money.”
In our latest Guest Post, Justin Eames, Head of Innovation at digital product development studio fish in a bottle discusses how startups can create an ideation process to boost innovation.
Many studies show that startups who adopt an ideation process are more likely to succeed than those who don’t.
If coming up with great ideas is key to the success of your startup, then considering how you can manage and improve that can give you the competitive edge.
This is particularly true for digital startups, where the complexities of software development makes getting from ‘great idea’ to ‘great product’ especially challenging.
In this short article I want to encourage anyone leading a startup, whether they consider they are inventing something new or not, to build an ideation process into the fabric of their business.
To get that off the ground you don’t need to make a big investment in time or money, or adopt complex processes. The benefits of a structured approach to innovation can come from just a small number of easy to implement steps.
The typical picture of a digital startup has a visionary founder – the entrepreneur – at the helm, driving the direction of a product while a team around them are tasked with delivering it.
The visionary founder usually works at the highest level of the concept while the team around them are responsible for making decisions about technology, design, customers, marketing and finance.
For the product to succeed, each of those areas must align and have input into the ideas that drive the business. Doing that without a process can be very challenging.
For startups, success requires them to identify where the needs of their users, the requirements of their business and the possibilities of design and technology meet. Once they find that point they are on their way to finding success. This is where an ideation process comes into play.
84% of executives say that innovation is important to their growth strategy, according to a study by McKinsey. Given that statistic, it’s surprising that so few identify it as an activity that someone within their business should own. So all businesses should consider assigning someone to the role of Head of Innovation. Even the most resource-poor startup can do that as this doesn’t have to be their only role, or a major time drain. All that’s required is that there is someone with the authority and responsibility to ensure that the process of generating ideas is managed, in the same way that any other mission critical aspect of a business are managed.
Setting this up need not be a daunting task, there are tried and tested ideation processes from which to draw on and plenty of case studies demonstrating their success. For a long time, organisations that rely on ideas for their success have recognised that ideation, when untamed, is a chaotic and time consuming activity with hit-and-miss results.
As far back as 1942, Alex Osborn (the O of famous advertising agency BBDO) proposed techniques and strategies for generating creative ideas. His book, “How to Think Up”, argues that creativity is not an innate talent but a skill that can be developed through methods and practice. More recently, IDEO (famous for inventing the first computer mouse for Apple) coined the term “Design Thinking”, applying it to their set of ideation methods.
By using lead generation for law firms to reach potential clients, they can establish themselves as experts in their field and build their brand. This can help them to attract more potential clients, generate more leads, and ultimately, convert more of those leads into paying clients.
Any ideation process for digital products will do well to draw on those “Design Thinking” methods including empathising with users to understand their needs and experiences, formally defining the problem, ideating and prototyping possible solutions, as well as testing and iterating on those solutions based on user feedback. This approach has proven to be highly effective and there are many case studies to support that.
For instance, Airbnb used design thinking to completely redesign its website and user experience, turning them from a failing business to a thriving business. An ideation process for digital products should segway comfortably into project management methodologies like Agile Scrum, joining up the complete digital product development process from vision to ideation and through to production and iterative delivery. It’s certainly never too late to build an ideation process into any business, but there is no doubt that doing so from the earliest stage brings huge advantages.
My advice is to keep your ideation process simple and appropriate for the outcomes you need. As your business grows you’ll find you naturally add stages and people to the ideation process. As your business grows, you can start viewing it as a part of a wider innovation function of your business. — Justin Eames is Head of Innovation at digital product development studio fish in a bottle. He’s the creator of The Ideation Framework, an open methodology that’s designed to improve innovation within startups and small teams.
At AIN we believe that promoting female entrepreneurship is central to economic growth and meaningful innovation.
This IWD we wanted to celebrate female entrepreneurs and at the same time, acknowledge the need to boost both the number of female startups and also female investors to ensure we can truly democratise angel investment.
According to research from Pitchbook female-founded companies in Europe have received just 1.3% of VC funding since 2017.
Having more diversity across the whole startup ecosystem would help. Research by Beauhurst and the UKBAA found just 14% of female angel investors are women, but having more women investors could help to shift the dynamic.
AIN Head Of Impact and exited founder of GrubClub Olivia Sibony launched our Female Founders page to provide our audience with access to companies led by one or more female founder on the UK Angel Investment Network.
This is the first step in our journey to bring together a community interested in funding and supporting women-led businesses. Check out some of the innovative startups currently looking for funding.
According to Sibony: “Women represent 51% of the population. By far the largest under-served population in the world. In an increasingly uncertain world, we cannot succeed if we carry on with the status quo. A key to change, is to bringing new voices in to the narrative. Women have such a powerful voice that can help balance the perspective and help bring about fresh thinking.”
Over the past year we have been thrilled to support exciting businesses with female led founding teams including Period care and sexual health brand Here We Flo who raised £1.7m in an angel funding round, supported by AIN.
Here We Flo’s mission is ‘shamelessly natural care for life’s messiest moments’. The brand intends to challenge, shame and disrupt the period, bladder and sexual wellness markets with organic and vegan products. Here We Flo was created by university friends Susan Allen and Tara Chandra. (pictured at the top of the article.)
We also saw another incredible business, Birmingham-based smart-EV and energy storage startup WAU (We Are Universal) raising £650,000 in a pre-seed funding round. Crystal Drury (pictured above), co-founded the business alongside Linas Pozerskis.
When asked about the importance of gender balance in founding teams they said “Diversity allows you to see the same situation from multiple powerful angles.”
Meanwhile sisters Katie and Amanda McCourt are co-founders of sustainable underwear disrupter Pantee. They raised successfully on the AIN platform last year, with investors buying into their creation of the world’s first underwear brand made from deadstock t-shirts. The duo are currently raising again. Check out their pitch.
We hope these successful startups can help inspire other women to launch their own businesses and potentially go on the become angel investors themselves.
According to Head of Marketing at AIN, Marisa Scullion: “We understand platforms such as ours need to help push the dial and make funding and supporting women-led business accessible and achievable. There are now many fantastic fundraising platforms made for women, led by women, inspired by women which is motivating. Women have a huge role to play in the growth of the tech industry and we want to help bring together our community interested in funding and supporting women-led businesses. It will benefit the whole startup ecosytem”
Becoming an angel investor can be a hugely rewarding way of using your experience and capital to support innovative startups and potentially earn a return on your investment.
As this involves deploying your own personal capital this is of course, not something you want to tackle lightly. We’ve spoken to a series of experienced angel investors and investment experts to give you the low down. Here are their top tips for anyone considering the high octane game of backing early stage startups.
1) Educate yourself
Before going down this path, it is really worth taking the time and effort to learn about the startup ecosystem. Also learn about the different types of investments available, and crucially the characteristics of successful startups. This can include doing online research, reading books, attending conferences, and talking to other investors. It also means really understanding the minutiae of the various Government schemes to support investment like EIS and SEIS and their global equivalents. Particularly given there will be significant changes in April.
Once you have educated yourself, it is crucial to then think about the types of startups you want to invest in, the amount of money you’re willing to invest, and how involved you want to be in the company’s operations. It is crucial to consider whether what you want to bring is a sector expertise that would lead your investment strategy or whether you will become more broad based.
According to Matthew Louis from the AIN brokerage team: “According to investors I speak with, I would say most investors are involved in 6-8 projects. However those more involved in specific industries tend to be 2 or 3. With F+B it tends to be broader. With software there will be more of a specific criteria.”
Having a broader base for your investments rather than a focused expertise can provide more opportunities for areas of passion, which can be a great motive. However it is imperative to not let this cloud any judgement in your cool headed investment strategy.
According to experienced investor Noel Duigan: “I think you really need to be paying attention to both the head and gut, I don’t tend to invest with my heart, at all. I will always look at the business case first to see the potential. If that checks the box and my gut is off then I pause and try to work out what the problem is. If I can’t find it, but still keep that feeling that something isn’t right, I don’t usually invest.”
Building relationships with other investors, entrepreneurs, and industry experts is crucial for any investor in learning about new investment opportunities, conducting due diligence, and getting insights into the startup ecosystem. Angel Investment Network was set up as an online platform to shrink the globe and connect investors with the exciting businesses of tomorrow and others in the startup ecosystem. There are a variety of online and offline forums for meeting people in person.
Roxane Sanguinetti is an experienced investor who works with Alma Angels and is co-head of the London chapter of Women in ETF’s. She advises: “Ask loads of questions and ask for help from experienced angels – what do they look at? What questions do they ask during due diligence? From my experience, angel investing is a collaborative environment. I am yet to meet an angel who hasn’t been open to discussing their journey or their investments. As a first step, joining a community or a syndicate can be of great help for those who feel they need an organised structure. You get to ask your questions in a safe space and see dealflow more easily.”
4) Do your due diligence
Once you are at the point of backing a startup, doing due diligence on any startups is essential. Evidence suggests that investors who spend longer on DD get higher returns. Indeed UKBAA research has shown that at least 20 hours due diligence has a positive impact on the likelihood of a multiple investment return.
AIN has produced a series of check lists on how to do your due diligence. The key areas of focus should include the team and management, business, market, technology (if applicable), finance, tax and legal. Red flags should be front of mind at all stages. The more experienced you become the quicker you can spot them.
For Noel Duigan the founding teams’ experience or lack of it is key: “Often you are investing in the founders rather than the company. If the founders don’t have any skin in the game, that’s pause for consideration. Lack of traction in their space will often mean stalled growth and is a red flag.”
Meanwhile according to investor Addy Windsor-Clive: “Red flags include a pitch deck that isn’t in a suitable format, failing to cover the typical questions a VC would ask. Also not knowing their market size or having a product fit.”
5) Think how you can add value
Finally (and to slightly mangle a famous quote by JFK) an investor should ‘think not what a startup can do for you, but what you can do for the startup.’ As someone with experience in either building a business or some deep sector knowledge you can offer your invaluable knowledge to a startup building the next game-changing business.
Xavier Ballester, Director at Angel Investment Network’s Startup and Property Divisions has worked with hundreds of angel investors over the past 17 years. He says: “Over the years I have seen the different ways angel investors can bring more than money. This includes: Industry contacts, Industry know-how, business skills (many have been CFOs, CMOs), help with strategy and potentially other investors.”
Meanwhile according to Stephens: “Adding value as an advisor/angel is always complex – there have been many examples of angels adding considerable value. For example, someone I worked with helped an FMCG business, as he already had a company that runs one of the UK’s largest warehousing facilities for Ebay. So he helped with supply chain and logistics leveraging his existing assets. More broadly, investors should and normally do always make intros, roll up sleeves and much like charity trustees pitch in where their skillset permits.”
To summarise, if you are thinking about becoming an investor ensure you first educate yourself with the wide variety of online and offline resources. Next define your investment strategy based on your skillset andnetwork with others (in particular experienced angels). Once you are ready to invest, do your due diligence and really think about how you can add value.
In January 2023, AIN hosted a webinar with Anna Gordon from HubSpot on how startups can use a CRM to manage your fundraising process and investor relationships. If you missed it, here are the top takeaways.
View the investor fundraising process as a sales proces One common mistake that startups often make is not treating the investor fundraising process as a sales process that needs to be managed.
Deal pipelines aren’t just for sales Deal Pipelines aren’t just for sales. Indeed you can use a pipeline to track your fundraising process. You can also use a sales dialer software that can provide sales teams with valuable customer data, which can be used to generate more sales and better serve customers.
Leverage a CRM to facilitate your outreach You can leverage a CRM to facilitate your outreach to investors by using tools such as templates and sequences.
Quality investors early Similar to sales, you should quality investors early on with Sales Methodologies such as BANT. The questions you need to ask are: Does the investor have budget? Do they have authority to make the decision and are they willing to spend time with you?
Use CRM tools to establish regular email updates with your existing investors. Finally, in addition to helping you communicate with your prospective investors, remember to use CRM tools to establish regular email updates with your existing investors. To check and clean up your email list, you can use an email validation by Zerobounce.
Whether working from home, in an office, or any other work environment, the pressure to perform can quickly lead to exhaustion, cynicism, and a lack of motivation. It’s a vicious cycle that can be hard to escape, but it’s not impossible.
With the right tools and strategies, you can learn how to manage your workload, reduce stress such as by using cbd, and maintain your mental and physical health. Whether you’re an entrepreneur, motivated team member, or a student, this article is for you. So, let’s get started!
What is burnout?
Think of burnout as a slow burn, like a candle that has been lit for too long and is starting to lose its light. It creeps up on you, taking over your thoughts and energy until you feel completely overwhelmed and exhausted.
It’s a feeling of disillusionment and disconnection that can make even the simplest tasks feel like a burden.
It’s important to understand that burnout is not just a state of mind. It’s a natural and complex phenomenon that can seriously affect your mental and physical health.
But the good news is that it’s also preventable. By taking care of yourself, setting boundaries, and learning how to manage your workload, you can avoid burnout and live a more fulfilling and balanced life.
So, if you feel that slow burn, don’t ignore it. Take action and put out the flame before it consumes you.
Identifying burnout symptoms
Before qualifying how to recover from burnout, it’s essential to understand its symptoms.
Common signs of burnout include:
Inability to focus
On a physical level, burnout can manifest as
Other kinds of physical discomfort
It can be challenging to recognise the signs of burnout, as they can be subtle and easily overlooked. It’s essential to be aware of the warning signs and take action to prevent burnout before it becomes a severe issue.
How to recover from burnout
Recovering from burnout requires taking care of both your physical and emotional wellbeing. If you’re tired from work, it’s important to take some time off to recharge and refocus.
As an entrepreneur you can promote wellbeing as a policy that supports work-life balance and provides resources for stress management. Ultimately, you will be more productive with a healthy mind and body.
As individuals, simple wellbeing tips can be used to prevent burnout. Remember, taking care of yourself is not selfish; it’s essential for your long-term health and wellbeing, both on and off the job.
Prioritising self care
To protect yourself against burnout, you must commit to making time for self-care. This doesn’t necessarily mean expensive spa trips or activities outside the home – it can be as simple as having a regular bath or doing pilates for 10 minutes at home.
What is important is that you make time to do something for yourself each day, even for a few minutes. This will allow you to relax uninterrupted and focus on your self-care.
Creating a daily routine
Creating a daily routine helps provide structure and encourages self-discipline. As much as possible, try to be consistent with meal times, bedtimes, and leisure activities so you’re not constantly questioning what you should be doing next. A routine also helps reduce stress by giving your mind a sense of structure and familiarity.
Your breath is one of your greatest tools in keeping calm. Breathing exercises are a simple and effective way to reduce stress, improve mental clarity, and promote relaxation. By controlling your breathing, you can improve your heart function, reduce anxiety and calm the mind. Breathing exercises can be performed anywhere and at any time, making them a convenient and accessible tool for managing stress and promoting relaxation.
There are several different breathing techniques to choose from, each with its own unique benefits, so you can find the one that works best for you. Whether you’re new to breathing exercises or have been practicing for years, incorporating them into your daily routine can help you feel more relaxed and rejuvenated.
Eating and sleeping well
Adequate sleep and nutritious meals are two of the most important ingredients in avoiding burnout. To ensure you’re getting enough rest, try sleeping at the same time every night and sticking to a consistent schedule.
Eating nutritious meals will help fuel your body with the energy it needs throughout the day. Additionally, try incorporating small workouts into your daily routine – even 15-20 minutes of light exercise can help keep your body energised.
Exercising regularly can be an effective way to strengthen your body and mind while avoiding burnout. Physical activity reduces stress hormones while stimulating endorphins that make you feel good.
Regular exercise will also help you get better quality sleep in the evenings while supporting your body’s overall health. As a bonus, physical activity can also help clear your thoughts, making staying focused on the task at hand easier.
Supplements such as CBD Drops
CBD has become a popular alternative for those looking for new methods to manage burnout. It’s not just a trend either – as the CBD market has exploded globally, with the UK market said to be worth more than vitamin C.
As an entrepreneur, you are looking for anyway to boost performance and so CBD is an obvious choice to test as a bio-hacking tool. Water Soluble CBD drops are one of most effective forms, due to being fast acting and highly absorbable.
Of course, everyone is different, and results may vary, but there are those that swear by it, CBD might be a game changer.
It’s important to set clear boundaries with employers, colleagues, and family members to protect yourself from burnout. This may require saying no more often or delegating tasks to free up some time for yourself.
If you’re feeling overwhelmed with responsibilities, take a step back and re-evaluate how you can manage those duties more efficiently to make some extra time for something more enjoyable – like reading or taking a walk.
Connecting with Friends and Family
Socialising is an essential part of self-care that is often ignored in our busy lives. Make time to socialise with friends or family members regularly.
Whether that be regular phone calls home or having supportive conversations with colleagues at work, staying connected can help you stay mentally engaged while creating a sense of community support.
Seeking professional help
If all other methods fail, don’t hesitate to seek professional advice from a doctor or therapist who can help guide you through any issues that may be causing burnout in your life.
Burnout is a serious problem that you should not take lightly. With simple lifestyle changes to prioritise self-care, relaxation, exercise, and socialising – as well as seeking professional help when necessary – one can effectively avoid burnout while recharging their energy.
Burnout is a growing concern in today’s fast-paced society, but taking care of oneself and utilising alternative methods such as CBD, exercise and seeking help can greatly aid in managing its symptoms.
For our latest Behind The Raise interview we speak to Moses Rashid, founder of online marketplace for Limited edition Sneakers & Streetwear, The Edit LDN. He reveals how he had his lightbulb moment at a sneaker festival, his huge focus on service and the impressive partnerships and celebrity backers that have helped propel the business forward.
He also reveals his top tips for anyone raising investment for the first timeand why he initially thought a call from Harrods wanting to partner with The Edit LDN after just 18 month of operating was a prank…
Tell us about The Edit LDN?
At The Edit LDN, our mission is simple. Making the inaccessible, accessible. Helping our diverse, fashion-hungry community across the globe access the best in limited edition fashion and sneakers from the biggest brands in high-fashion.
How did you come up with the idea?
I’m a sneaker head at heart and would spend my days at sneaker festivals buying shoes. One day I was at a sneaker festival buying a pair of shoes that were £600/700. I asked a simple question, do you have a plastic bag? And the guy selling them said no. It blew my mind that I was paying for a premium product but I wasn’t getting a premium service. That was the lightbulb moment. How can we create the most premium sneaker platform globally?
How are you different?
Smashing the restrictions of traditional online shopping, our product specialists work hard to maintain a market-leading, unparalleled range of sneakers and streetwear unique to The Edit LDN. So customers will never be short of exciting new pieces to discover.
In a market which traditionally takes 2-6 weeks for delivery, our service level was about delivering this in 1-5 working days. A few months ago we become the first global reseller to achieve same day service. We are also all about creating a Personal Shopping service. Offering a tailored styling experience, and access to a product sourcing service, where we take on the hunt for the perfect piece on behalf of our customers.
What initially attracted investors to your company?
If you think of our business like a FarFetch premium retail environment powered by tech. For us it’s all about creating real value for our customers. Our mission statement was about becoming the most disruptive, innovative sneaker streetwear platform globally. I’m pleased to say we’ve achieved that.
We were the first to accept crypto. We were the first to achieve same day service in a market that normally takes 2-6 weeks. We were the first to donate sustainably. For every single sale on our platform we take 1 kilo of plastic out of the ocean. Investors have bought into our vision and record of delivery so far. We also have a number of sports celebrities who have invested, such as New York Giants captain, Xavier McKinney, basketball legend PJ Tucker and Premier League football star Jesse Lingard.
What has the funding enabled and your top priority going forward?
Part one of our funding was about personnel and putting the right people in the right places. Part two was about testing the technology. Making sure it was user friendly, both for the reseller and the consumer.
Part three was marketing and there are two parts to that. Paid performance/ affiliate to support customer acquisition. But also the brand piece as well. How can we continue to create PR moments and elevate our brand? You’ll see we have just signed a 2 year Global Partnership with Chicago Bulls.
Part four was warehousing, so making sure we could deliver everything in-house. That was really important from a cultural and environmental point of view. Making sure we can really accelerate the business.
And then the fifth strand was about building the pre-loved market place to tackle a $60BN industry, and make a long lasting sustainable impact.
Why did you raise via Angel Investment Network?
I was introduced to AIN via my brother and out of the angel networks we’ve worked with, it’s delivered the best results. It’s been the most fruitful.
What are your top tips for anyone raising investment for the first time?
It’s really important to get out there, be flexible, have lots of conversations, but know that only a few are going to convert. Make sure you are chasing down those conversations where something might come through. The same approach you would have with any sales process really.
When you are pitching, having real clarity on your USP. What’s your vision/ mission, really where is the business going? Of course understanding that investors are going to want to know what is their return on investment.
You are the first business of your kind to be welcomed into the legendary Harrods, London. What was your approach to getting a such a prestige listing just two years after launching?
We were actually approached by Harrods after just 18 months of trading, on the back of great media coverage we had secured in Forbes and GQ. At first I thought it was someone playing a joke, but then there was realisation that Harrods were really serious and could see the power of our marketplace and that we could really deliver for their high end customers.
We started off with one small section on men’s which has now expanded to three floors. It’s testament to our positioning, but also how well we’ve been received by their customers.
We are also thrilled as part of our global expansion to be Galeries Lafayette (Doha) and Harvey Nichols (Riyadh) and as reported in Esquire we partnered with the legendary Chicago Bulls in a multi-year partnership. They spotted the great synergies with their sports fans and sneaker heads.
The new year offers everyone a great opportunity to reset and renew. For startups seeking investment this could be the perfect time to evaluate your approach and see if it needs tweaking.
After all, we are in a very different climate in 2023 and investors are being far more careful with the deployment of their capital. To boost your chances of a successful raise, ensure your strategy is tailored for now, not last year.
So what key resolutions should startups focus on in 2023?
1) Revisit your elevator pitch
The life of any startup is varied, stressful and relentless, wearing so many hats and juggling so many balls. All the while, trying not to let any drop or run out of cash. However in this maelstrom of activity it remains crucial to not lose sight of the eureka moment that led you to quit the day job and come up with the idea in the first place. The start of the new year offers a great chance to refresh your core pitch for investment as clearly and articulately as you can.
According to AIN co-founder Mike Lebus: “One of the key mistakes entrepreneurs make is not explaining the concept clearly enough. Entrepreneurs are often too close to their own business, so don’t give enough information for a stranger to understand exactly what their business does.”
Why not start with a blank piece of paper and make sure you can get the pitch down to a paragraph? A clear articulation of a real world problem, how your startup solves it and what it actually does. You need to be able to story tell.
Having the right credentials, the perfect team and a beautiful pitch deck means nothing if you can’t explain to a stranger, simply and convincingly, why your company needs to exist. Test it out on more critical friends and contacts who you trust to give some honest feedback. Is it as straightforward as it could be?
2) Critically review your pitchdeck/ pitch materials
The new year could also be the perfect time to review your pitch materials and pitch deck. According to Lebus: “A common thread running through unsuccessful pitch decks is startups not focussing on their core product/service. Some business plans say “we plan to do this. and this, and this, and this…”, which can become very confusing for potential investors. Feel free to mention your long-term product pipeline towards the end of your pitch, but the main initial focus should be on your current/initial offering to keep things as clear as possible.”
Another reason many pitch decks fall down in Lebus’ view is the failure to differentiate what they do from the competition and how they’re going to gain market share.
Use this time at the start of the year to review your pitch deck and ensure there is a clear narrative, focus on the core product and how it stands out from competitors. Investors will want to see that your nascent business is learning to walk before it can run and that the promise of a decent future return is tangible.
3) Consider a lower valuation in the current climate
In the current climate many businesses are needing to alter their plans and potential funding pathways. Early 2022’s valuations already seem like a different era with layoffs in the tech industry and an uncertain medium term economic outlook. What was 8x early last year may now only be 5x.
According to Alexander Caparros, analyst from the AIN brokerage team: “We are seeing a lot of pushback from investors, less willing to back companies whose valuations are based on the uncertain promise of future revenues. It is vital that valuations are rooted in fact and not fantasy. Proof of concept is now a must have. You will be far more likely to gain the interest of prospective investors with a more realistic approach.”
It could be time to consider whether you might change your strategy and raise a smaller amount at a lower valuation. You will still be giving away a similar amount of equity but are more likely to get the investment.
4) Traction, traction, traction
With investors less willing to bet on unproved models, fabled traction is more important than ever, particularly in a more restrained climate for investment. Xavier Ballester is an experienced broker who has worked with AIN for 15 years and works closely with investors across the globe.
He says: “Evidence of traction is always critical for startups seeking funding, but in 2023 it is king. With investors less willing to bet on unproven concepts, it is crucial startups can demonstrate the viability of their proposition through evidence of success. All the more hard won in recessionary territory. If you can show there is appetite for your proposition now, this will show a clear pathway to future profitability and investor returns.”
Take the time to revisit your traction points and make sure they really stand out and are relevant.
5) Re-appraise your communication strategy with investors
January is a great month to connect with investors with a fresh update on your business. If you are reaching out cold, think how succinct you can be while covering off some vital points.
According to Matthew Louis from the AIN brokerage team: “Investors are busy people and likely to be inundated with pitches and proposals. Make sure yours gets to the point quickly with the information they need. Think top level information about the company and what you do, the problem you are solving for, why it is different, the traction, team, how much you are raising, the valuation and what you are planning to do with the investment.”
For investors already on your database is this the time to give that perfect ‘nudge’ on what has been going on with the startup. Perhaps it is a new product launch? New staff hires, new clients or traction point such as a revenue milestone. Perhaps something has happened in the news that provides a reminder of the need for your business. Something with context and relevance will ensure this isn’t just spam and likely to get your startup noticed.
The new year is a good time to plan a content pipeline for your investors and outreach strategy for new potential investors.
Following these five resolutions could help you supercharge your fundraising in 2023. Perhaps there are others you would add to this list. The key things is making sure they are realistic and that you can stick to them. Happy new year from the AIN team and good luck!
Businesses are missing out on huge commercial opportunities due to a lack of gender diversity in early stage business investment. This is the message from experienced investor Roxane Sanguinetti in our latest Meet the Investor interview. Tackling the gender funding gap was her motivation in joining Alma Angels, which backs female and/ or minority founders. It is now 350 angels strong. As well being an investor with Alma Angels she is co head of the London chapter of Women in ETF’s.
In a wide ranging interview she discusses how to create a more level playing field, why it matters, the sectors that she is drawn toward investing and the common qualities of founding teams she has backed. Why dedication is what you need…
What led you to angel investing?
A few years back I was advising start-up founders on their fundraising decks and financial models, as I had realised it could be helpful to those who do not have a finance background. I kept coming across some very interesting business models and I started thinking “oh I wish I could invest in that one!” but I lacked confidence. I started with a few investments via crowdfunding in businesses I had met or supported, but I wanted to get more involved.
I went looking for an angel community, or mentors who could guide me. One thing I knew for sure, I wanted to focus on female and/or minority founders. And that is exactly what I found with Alma Angels. December 10th 2019, I attended the first meet-up where we exchanged ideas on how to support female founders. Now 3 years later, we are a community of 350 angels who have collectively invested a few millions, and I’ve had the opportunity to learn alongside some incredible people.
You back businesses (co-)founded by women. What drives you to do this?
I want to see more wealth in the hands of women, be it on the fundraising side or the investing side. And these go hand in hand.
We have all seen the horrendous stats – only about 1% of VC funding goes to all-female teams. There is a fundraising access gap for female-led businesses, and I have pledged to bridge that gap by investing and introducing the founders to my network. I also spend a lot of my time educating on angel investing. Women are more likely to back women, but less than 15% of angel investors in the UK and Europe are women. And this isn’t about charity, research shows that investments in female-founded start-ups perform better than in all-male teams. Ultimately, we want to create a virtuous cycle: successful exits to bring more wealth to reinvest.
I want to do everything that’s in my power to better the ecosystem and level the playing field.
From a business perspective, what are the benefits of ensuring we have more gender diversity in the start up ecosystem?
There is now a lot of research and data on the financial benefits of diverse leadership teams. Businesses are potentially missing out on opportunities and revenues from half of the market when products and services are not adapted. One sector I know well is WealthTech: Over the last few years, we’ve seen an explosion of businesses such as roboadvisers and trading apps. What all these apps have in common is that women are rarely involved in building and testing, and it now shows in the user base. 70 to 90% male. Which is an opportunity for female-led businesses to come in and make a killing.
To build long-lasting inclusive technology AND businesses, we need diverse teams involved in the whole process – from ideation to development, testing and distribution. And by diverse, I mean gender-wise, racially but also cognitively.
And if I can expand the question to the investing landscape: diverse investment teams will back a more diverse portfolio of founders, which is beneficial in terms of returns but also means that they are more likely to support builders of inclusive technology.
What sectors particularly interest you for investment?
I am naturally drawn to FinTech and WealthTech due to my background. I understand the pain points and I feel that I can be more helpful to the founders. However, now when I look back at my investments, they are all from various sectors (I added Sexual Health, Recruitment, Impact…) but they all have in common that they are making the world a better place for women and minorities! And as new sectors emerge, my curiosity gets tickled. I have recently been looking more into web3 businesses.
What are the successful traits and tactics of founding teams you have backed?
I think my founders all have in common an insane sense of dedication. They are so incredibly passionate about their cause and are the most hardworking people I have ever seen. They have all brought in impressive results with limited financial backing. A successful founder can also be one who realises their own limitations and know when it is time to sell or to step away from the business, even when it does not maximise their profit, but it ensures their team and the business can carry on.
Female investors are twice as likely to invest in women than male investors. What advice would you give to those interested in getting into investment for the first time and getting active?
Ask loads of questions and ask for help from experienced angels – what do they look at? What questions do they ask during due diligence? From my experience, angel investing is a collaborative environment. I am yet to meet an angel who hasn’t been open to discussing their journey or their investments. Angel investing is a game no one plays on their own, as we are there to support the founders through their early fundraising journey so we coinvest, we help each other out, we connect with later stage investors. As a first step, joining a community or a syndicate can be of great help for those who feel they need an organised structure. You get to ask your questions in a safe space and see dealflow more easily. By the way, Alma Angels is 70% women.
Does the current national and global context, and the outlook of an increasingly uncertain world change your investment thesis?
I wouldn’t say that it changes my investment thesis. Female-founded businesses generally have had to build with very limited funding which tends to make them much more resilient, much more cost/ cash-burn conscious. BCG released a report stating that female founders generate twice as much revenues per dollar invested than male counterparts.
What has changed however is the way I look at the business models. I might focus my due diligence questions on some risks that seem more prevailing due to current market conditions.
For our latest Meet the Investor Interview we chat with Addy Windsor-Clive, an investment manager at Regenerate Ventures. Regenerate Ventures is an EIS VC fund focusing on Early stage AgTech investments.She discusses her motivation in supporting startups tackling the ‘broken’ agri-food supply chain, her desire to see a more diverse set of founders within agriculture and the trends transforming the ag-tech sector.
What led you to investing in start-ups?
I started my career in Venture Capital and that’s where my love for it began and helping startups reach their true potential.
You back businesses that drive systemic change in the food system. What drives you to do this?
The agrifood supply chain is broken and all the pressure is being put on farmers so we are trying to alleviate that issue as well as producing food without ruining soil health to ensure it for future generations.
What is the gender and ethnic make-up of the founder population you look at? Does this impact how you invest in businesses and the way they work?
We are seeing more and more female led companies but we would like to see a much more diverse set of founders within agriculture.
What interesting trends are you seeing in the Agtech sector?
Precision agriculture to improve efficiency of crop prediction and yield and decarbonisation of the agricultural sector.
How are these trends changing the system?
Helping reduce chemical and fertiliser inputs that are helping to improve soil health but also to reduce GHG
What would you like to see more of, to accelerate the change in this field?
I would like to see more around soil testing and also data aggregation in the sector.
What are the key red flags when you are dealing with start-ups that you are potentially going to back?
A pitchdeck that isn’t in a suitable format asking the typical questions a VC would ask. Not knowing their market size or having a product fit.
What has made the biggest difference among your successful investments – traits and tactics of the founding team that have made the biggest difference?
In the AgriTech sector all the founders are very mission led and pivot easily as a result of feedback from industry experts. Also founders that are not afraid to give away equity.
What advice would you give to entrepreneurs going through the fundraising process?
Have a bank of FAQs ready to go, ask friends and families or an investor that you know to help work them out. Allow yourself enough time.
Does the current national and global context, and the outlook of an increasingly uncertain world change your investment thesis? If so, how?
If anything it only verifies it more. The global food security and food safety issue is only becoming more pressing and investing in this sector as this stage is absolutely key to the future of the planet.
As both an investor in start-ups and a founder currently fundraising for your own fund, what is your top tip for anyone looking to fundraise for the first time?
Good pitch deck, all FAQs ready to go. Find out what the investor is looking for and tailor your pitch to that.
‘Founders need to be passionate, driven, and fully committed in the longevity and future of their company.’ These are the words of experienced investor Noel Duigan describing what he expects from entrepreneurs pitching their business ideas. As someone who has personally invested in 12 businesses in the past year his advice is worth its weight in gold.
We are delighted Noel has given his time for our latest Meet The Investor interview. He discusses the reasons he invests, his typical ticket size, the red flags he looks out for, how founders should update investorsand top tips for anyone raising for the first time.
What has led you to angel investing?
Independence mainly. I looked at it as a strategic step to gain financial independence and build a successful family office. Prior experience has helped me overcome a level of confidence required to interact with founders and CEO’s and not be afraid to ask the ‘stupid’ questions when I don’t know or understand something.
What do you invest in and at what stage? Any reason why you go for those investments?
I mainly lean towards tech and fintech due to the scalability. However I have also ventured into renewable energy. I prefer to get in at the seed round, but have also invested in Series A and B, as well as pre-seed. I think it’s being sensible with your portfolio and spreading the risk. Seed is attractive due to the low valuations and high potential for return, but with greater risks. So I hedge these with larger investments into Series A and B rounds, smaller returns and ‘usually’ a safer bet. But not always!
Do you invest with the head, the heart or the gut?
I think you really need to be paying attention to both the head and gut, I don’t tend to invest with my heart, at all. I will always look at the business case first to see the potential. If that checks the box and my gut is off then I pause and try to work out what the problem is. If I can’t find it, but still keep that feeling that something isn’t right, I don’t usually invest.
How often do you tend to invest per year and do you have a typical ticket size?
A few times a year, however the last year was quite busy with 12 investments. The sweet spot for me is £100k. However, I have a few at £200k and some at £50k. It really depends on the round, valuation and exit opportunities.
What are the key red flags when you are dealing with start-ups that you are potentially going to back?
Lack of experience of the founders, or their team is the main one. Often you are investing in the founders rather than the company. If the founders don’t have any skin in the game, that’s pause for consideration. Lack of traction in their space will often mean stalled growth and is a red flag. Have a look at their runway and burn rate, you don’t want it short and wide. That could spell either bad margins or high overheads.
How do you view your relationship with your investees? What is a good relationship?
At pre-seed/seed the company is smaller so the relationships tend to be more personal. You can offer networking support and help with growth. Whereas the later rounds you really are just a name on the cap table. Regardless of when you invested, a good relationship means consistent updates.
There is a challenge for founders to find a sweet spot between the management of their workload, and the stress it entails, alongside the expectations of their investors.
How often do you think founders should be updating their investors of their progress and by what method?
At a minimum a quarterly update should be emailed to investors covering progress (or lack of), metrics and financials.
What is your top tip for anyone raising investment for the first time? What gets you on board?
You need to be vested. A product or service driven from need, not greed will always win over investors. The market is over-saturated with people making a dash for cash off recycled ideas. Founders need to be passionate, driven, and fully committed in the longevity and future of their company. Hand sanitiser during a pandemic doesn’t cut it.
If you could offer an early investor one piece of business advice, what would it be?
Research. Research the company you want to invest in. Research the founders. Research their pitch deck, research also includes fact checking. Research their product, download their app, try it out, read the reviews. When you are not researching a company then start researching for self-education. As we used to say: “Time spent on reconnaissance is seldom wasted”.
AIV Capital has completed an investment into next-generation Customer Data Platform (CDP) Zeotap. Founded in 2014, market-leading Zeotap is a customer intelligence platform designed to help companies better understand their customers and predict behaviour.
Zeotap’s GDPR-compliant Customer Intelligence Platform (CIP), enables brands to unify, enhance and activate customer data in the cookieless future while respecting consumer privacy and ensuring compliance. Recognized by Gartner as a “Cool Vendor”, Zeotap works with over 80 of the world’s top 100 brands, including P&G, Nestlé and Virgin Media.
Zeotap completed a Series D in 2021 placing the company valuation at over $160Mn. The latest funding will enable the German company to cement its market leadership by developing new product capabilities, with a specific focus on the privacy-centric needs of European clients. It will also expand its operating territories and go-to-market teams.
The standalone CDP software market is expected to reach $15 billion by 2026 at a 35% Compound Annual Growth Rate (CAGR), fueled by pandemic tailwinds. The company has seen 150+% CDP Annual Recurring Revenue (ARR) growth in the past year, emerging as the outright leader among customer data platforms in Europe.
AIV Capital is the institutional investment arm of Angel Investment Network, the world’s largest online angel investment platform. Led by experienced investment manager Ethan Khatri, AIV Capital’s focus is on investing between USD10-USD250 million into Growth and Mid-Market Buyout opportunities.
According to Khatri: “We’re very excited to be partnering with Zeotap in their last funding round. Under the leadership of Daniel Heer, Zeotap are dealing with a significant pain point for companies by ensuring marketing intelligence fully informs marketing spending. We often see companies that overspend on advertising and customer retention without the ability to differentiate between new and existing customers. This has only been exacerbated by the increasing demand for privacy regulations.”
He continued: “With their CDP and ID+ platform, Zeotap provides a cost-effective way for companies to future-proof their advertising and customer interactions. Zeotap is already one of the leading platforms in the EU and we believe the last round will only help concrete their position.”
“If you don’t see it, you can’t be it” says inspirational investor and founder Andy Ayim MBE. The quote describes his philosophy in setting up the Angel Investing School with the aim of empowering a new tribe of diverse angel investors for the benefit for the whole startup ecosystem. In our latest interview this game changing investor discusses his motivations, advice to aspiring angel investors, how he finds deals and where the best investment opportunities lie in this tougher climate.
What has led you to angel investing?
I was inspired to invest into startups because I met so many working class, diverse founders who lacked access to knowledge, networks and capital. Many didn’t have friends and family members who could invest in them despite having great skills, ideas and unlocked potential.
You started Angel Investing School in 2020, with the aim of empowering a new tribe of diverse Angel Investors, levelling the playing field of investment and increasing the numbers of BAME investors. Why is this important to you?
“If you don’t see it, you can’t be it.” Role modelling is important for empowering people to feel like they belong. Whether in school, at work or within an industry. The more diverse investors we have, the more diverse founders will get funded and have the opportunity to execute on their ideas.
You recently operated as a syndicate, investing with 8 other black investors (some new and some experienced angels) into a Consumer startup. What do you feel the benefits are to startups taking on funding from a syndicate?
Syndicates put simply are a collection of people that come together around an aligned area of interest. For a startup, this is great as they get to tap into the collective knowledge and networks of the group as well as efficiently managing their fundraise. Often the angels that invest small tickets, work hardest on the Cap Table to support founders and add value.
For the investors it is also great as it allows for small ticket investors to club together and cumulatively invest a larger amount into a startup. It democratises access to startup investing so that you could build a portfolio by investing £1,000 – £5,000 in each startup.
How did you find your first 2-3 deals and do you have any advice to aspiring angel investors who want to find their first deal?
The industry-wide challenge around inclusivity is that some of the best deals often get shared from founders and investors through private networks. The majority of new angel investors don’t have access to those networks.
Therefore, I highly encourage new angels to surround themselves with more experienced investors. That’s what I did as I joined syndicates such as HoaQ Club, HERmesa and Green Angel Syndicate as well as building relationships with individual angels.
The great thing is, you learn a lot from mistakes and just having skin in the game as an investor. Then your reputation starts working for you if you are responsive and helpful to the founders you invest in. That makes it more likely for them to recommend you to other founders in their network.
We understand every project is different but looking at your career of investing, with the startups you back how many conversations do you have on average from first conversation before signing a contract?
Like you mention, no two situations are the same. One thing I will say is that I don’t give in to FOMO. If I get a deal on a Friday that closes on a Monday, I simply say no as I need time to nurture a relationship and understand the founder and vice versa so they can get to know me.
I can usually do this with 3-5 meetings but some founders I know for over a year before committing too.
Our research shows that one of the biggest bugbears of entrepreneurs fundraising is the amount of time it takes from the initial conversation to signing the contract. What advice would you give to entrepreneurs going through the process?
The tech industry over indexes on intelligence and being smart. In reality, entrepreneurship is more about perseverance, grit and luck. Fundraising is hard work for most, there is no shortcut.
However, it should also be a great learning experience to on positioning, selling and storytelling. Most founders I speak to get better at this with time. I highly encourage founders to speak to other founders they trust who have previously fundraised as they are often an invaluable source of advice.
In this more challenging climate, what new hurdles do entrepreneurs need to overcome to win investment?
The current environment has seen a resetting of valuations, return to fundamentals (profit, revenue, unit economics etc) and capital efficiency. Any business, built on this as a foundation is off to a solid start.
Founders will need to foster relationships and play the long game with investors to build trust and show they have a plan to survive and thrive throughout this climate. Gone are the days for now of investing in scooters or deep tech companies with no clear business model.
Similarly, what are the best investment opportunities for angel investors in this tougher climate?
Angel investors should remain discipline and hone in on startups that fit their investment thesis. This environment favours certain sectors more than others. We have seen layoffs in particular with Buy Now, Pay Later and speedy grocery companies. Why? Because consumer behaviour has shifted and discretionary spending has been cut.
Founders that understand the terrain they are operating in and how they have adjusted their plans accordingly are the right ones to consider investing in – in this climate.
Andrew Craissati has had a storied career with over 20 years in senior roles across investment banking, Universal Studios, National Geographic, the David de Rothschild family office and the Virgin Group.Working closely with the country’s most famous entrepreneur, Sir Richard Branson, Andrew gained remarkable insight of the world of early stage investing.
As a founding member of the Bricks, an early-stage investment firm, for the past 12 years he has used his personal experiences in supporting companies. Not just with capital but with constructively designed support and value-additive skills and knowledge.For our latest Meet the Investor interview, he discusses the benefits of angel investing, the most exciting markets for investment at this time and an unorthodox but effective approach for identifying the top performers.
What’s led you to angel investing?
Coming out of 6 years of working closely with Sir Richard Branson as a regional chairman across the entirety of his Virgin Group, I had a remarkable set of experiences in the art – and science – of early stage investing. One of the key aspects which I most enjoyed was the people part of investing: realising and accepting that a business idea is a mere manifestation of people coming together and embracing people talent. So, in wanting to deploy wealth into early stage investing, I was drawn to it because of that very premise. How could I use my personal experiences in supporting companies not merely with capital but with constructively designed support, nurturing and genuine, value-additive skills and knowledge?
It seemed logical, therefore, for me to focus on early stage investing as this seemed to be the point where entrepreneurs need or want both capital and legitimate support. I felt as though my past experiences led me to a point of focus where companies were young enough to warrant the type of assistance I’m capable of providing.
What is your most active area of interest?
I would contend that our area of interest is driven more by stage and less by sector. To the extent that I and my family office are driven by a thesis, it is focused principally on several guiding parameters: (i) the founder or founders must come from the sector which they are targeting (and with domain expertise), (ii) the company must have the ability to articulate its product or service (whether yet built or not) and to demonstrate demand, (iii) there is clear differentiation in the company’s approach and (iv) both the company and we must believe that we make a difference to them by virtue of our value add approach.
In your opinion, what are the potential pros and cons of angel investing?
Our style of investing is very time-consuming and requires a steady level of dedication and focus. To my mind, this is the disadvantage of investing in early stage companies: the time that is demanded of an investor who leads (as we do) or an investor who supports and serves. Of course, this is also the rewarding aspect: the ability to be close and remain close to the founders of a business throughout the journey, even where our investment gradually becomes small by comparison to the other investors in the company.
What has made the biggest difference among your successful investments – traits or tactics that have made the biggest difference in the startups being flops or top performers?
I believe that the tactic (by us) which has driven the greatest additive aspect to our investments is our use of our in-house psychologist. While this might be an unorthodox response, it is by far the most valuable aspect of our pre- and post-investment processes.
Pre-investment, all of our founders and lead management team members take a fun and interesting test and private 1-on-1 interview with Sylvia, our psychologist. This process (we call it Team Dynamics) allows us to have an extremely deep understanding of the founding team and their relationship with one another (and with us, too).
Given that founding teams’ collapse is so often the main contributor to company failure, we have found this process invaluable in understanding the teams we’re meeting and helping them to maximise their relationships and interdependence.
You have started, led, and exited several successful ventures. What is the one piece of advice you would now give to your younger self starting out on your journey?
Listen to your gut. Sometimes it does a better job for you than analysis.
Do you invest more with the head or the heart/gut?
We invest with our head but the gut gives a very good reason to pull the plug or change an opinion. The key is to listen to the gut when it sends you a red flag.
Do you feel that being an operator before becoming an investor creates advantages over those with experience solely in the investing space?
To my mind, angel investing is a mixture of conceptual and theoretical thinking as much as it is about building relationships and bridges. It is key to understand the human aspect of being an entrepreneur: their fear, their self-confidence, their willingness to speak openly: these come most easily to those who have been in the same shoes or who have had to face similar challenges. That said, I know many institutional investors who are rich in their knowledge and who give sage advice: this comes from their years of seeing and processing challenges.
You’ve invested right across the globe during your career, where do you think is the most exciting market for angels at the moment?
Asia is always touted to be the most important continent on the planet, if only by its sheer population and geographical spread. True, it has critical mass but it also has tremendous diversity and cultural differences and challenges. I have a tendency to prefer the European markets at the moment as the valuations are generally well constructed, the legal systems are mature and structured to minimise legal issues and litigation and the cultural divide is minimal. While we do invest in North America, it can be more challenging in terms of legal systems and valuations.
Why do you use AIN to find investments?
AIN puts thought into the deals it shares and introduces. There is a genuine level of care and professionalism in what it does and how it does it.
Three of Angel Investment Network’s senior team have been named in the 2022 edition of the prestigious Spear’s 500. The index is the definitive market-leading guide to the top private client advisers and service providers for HNW individuals.
AIN co-founders James Badgett and Mike Lebus were named alongside experienced broker Xavier Ballester who has been with AIN for fifteen years.
Featured in the publication Lebus commented: “We have now grown to over 1.5 million entrepreneurs and over 300,000 investors across 194 countries worldwide. We’ve tried to never lose touch with our entrepreneurial roots.”
Also interviewed in the publication Badgett reflected on the “Phileas Fogg-like journey” of the network with “over 100,000 pitches submitted last year, ideas coming from almost every country – North Korea and Guinea included.” He said: “in this age of rapid innovation, it’s not just about the latest ‘OMG’ idea, but rather CVs and people. If you’ve got an idea plus a great team, you’re going somewhere.”
Describing AIN’s success in democratising access to early stage funding Ballester said that “the era of approaching ‘grey-suited men in ‘oak-panelled rooms’ in the hope that they would ‘bestow you some cash’ is finally over.” He says ‘‘We all have ideas. But it’s teams and people that turn great ideas into great businesses.”
David Pattison left school not knowing what he wanted to do. He ‘fell’ into the media side of the advertising industry. With two partners he founded globally renowned advertising business (PHD) and had a successful exit.
For the past decade he has been a hugely successful angel investor, working as a chair, mentor or adviser for a variety of businesses and CEOs. Acting as a ‘wingman’ watching CEOs and companies’ backs and witnessing first-hand the ups and downs of start-up and young company life.
Last year he wrote his first book, The Money Train: 10 things young businesses need to know about investors. It has received rave reviews and award recognition. We are delighted he has shared his insights with us. He discusses the benefits of angel investing, the common traits he looks for in startup founders and what new hurdles entrepreneurs need to clear to win investment in a more challenging climate.
What’s led you to angel investing?
I didn’t wake up one morning and decide to become an investor. It really found me rather than me finding it. I finished with full time executive roles in my mid-fifties and I started helping young businesses in a variety of roles. As they looked to raise money and I got more involved (often as a chair) then if it was a business I liked and had faith in then I would invest. As a result of this I started to get a reputation as not only a source of advice and help but also as a potential investor.
What are the benefits of angel investing?
I think it varies, depending on who you talk to. For myself there are three things that I find as benefits:
– I very rarely invest without some form of ‘mentoring’ involvement in the business, so I get to spend time with good companies and smart, young, bright management teams. – I no longer want to be a ‘big dog’ so seeing and helping a company grow and succeed and exit gives me real satisfaction. – Of course, there is the potential financial benefit. EIS and SEIS schemes in the UK mean that if you pick a winner then there is a real financial upside. I am not interested in running my own stock market investment portfolio, so I have built a company investment portfolio instead.
Having said that angel investing is almost always early stage so it is likely that you will get a high failure rate. I reckon over the years that for every ten investments I make then three really fly, a couple make a bit and then three or four are a claim on my tax return. But the ones that really fly make a lot. My best ever was a 40x return. The wins cover all the losses and still give a big profit.
What are the common traits you look for in the start-up founders you back?
It’s a mix of what the company is and what the founder is. I have three criteria when it comes to getting involved in a business or make an investment: – Can I spend two hours in a room with the people (particularly the CEO)? – Is it an interesting product? – Can I make a difference?
I believe I have good instincts and people judgement so with regards to the founders I have over the years added: -Are they legal decent and honest? -Are they clear on what they want to achieve? -Are they passionate about their business? -Do they listen to my views?
Having said that I sometimes fail to listen to my first instinct, and it usually costs me money!
Are there any red flags in dealing with start-ups that you are potentially going to back?
There are some red flags that I can spot before I invest, unfortunately some are well hidden and occasionally show themselves after investing. These are the pre investment red flags for me: -When the opening conversation is just about how much and when? – A team that is rewarding itself too well on other people’s money – If it’s in a sector I don’t understand fully. – If it’s going to be an entirely arm’s length investment with bi-annual updates then that doesn’t work for me. It does for a lot of other people who are really only looking for a financial gain. But not for me. – I find it very hard to invest in businesses where I don’t know the people and/or I am not introduced by someone whose judgement I trust. – I never invest in Apps. It’s just ‘a thing’ and I am sure I have missed a few good ones.
Our research shows that one of the biggest bugbears of entrepreneurs fundraising is the amount of time it takes from the initial conversation to signing the contract. What advice would you give to entrepreneurs going through the process?
If you want other people’s money then it’s just part of the cost of getting the investment. Too many entrepreneurs think that they are almost ‘owed’ the money and it should come quickly and with few strings attached. Every entrepreneur should respect your potential investors and their money. Having said that, in the investment process you only need to remember one thing: – Investors only care about one thing and that is their money and how much money you are going to make them. If you remember this then you will start to understand why it takes time. The other thing that a lot of young businesses do is fail to prepare for the fund-raising process.
– Get your finances and your forecasts in shape. – Make sure you know more about your business and your market than anyone else – Make sure you have a clear plan for the future and an exit strategy. The plan can, and often will, change over time but a clear route will play well. – Be clear on how much you need and what it’s for and what the deal is. With Angel investors they will expect you to set the deal parameters, institutional investors usually set it for you. – Enthusiasm for what you do also goes down really well. – A good lawyer pays for themselves a thousand times over in this process. – Don’t let the time it takes lead to deal fatigue, that’s when you agree to clauses that will cause you problems in the future and is often what some unscrupulous investors hope to achieve. – Young businesses always underestimate how long it takes to raise money and then hitting cash flow issues. – Leave lots of time to raise money. Even with Angels it can take 6 months.
One final thing to remember, there is a difference between Angel/Individual Investors and Institutional Investors. Angels/Individuals don’t have to invest and are much more likely to pull the plug at the last minute, whereas the Institutional Investors must invest to get their funds fully invested in a certain time frame.
We understand every project is different but looking at your career of investing, roughly how many conversations do you have on average with a founder before you are willing to invest?
As you say every project is different, but I would say that from first conversation to putting the money in it is probably 6-8 conversations. This would include meeting other members of the team and references. The variables would be: – Shorter if I know the people or the business. – Shorter if it’s in a sector I really understand. – Shorter if there is a role that I really want to do. – Shorter if my first instinct is really good.
You have been an investor, an entrepreneur, business leader and now an author. What is the one piece of advice you would now give to your younger self starting out on your journey?
Hindsight is such a wonderful and useless thing! Having said that the advice I would give would have been listen to my instincts, be braver, be more confident in my own judgement and don’t invest because you feel you ought to. Oh, and in 1997 put every penny I had into Apple stock!
In this more challenging climate, what new hurdles do entrepreneurs need to overcome to win investment?
In a challenging climate the chances of needing investment money greatly increase. Conversely whilst there is money around to be had, it becomes harder to get and the chances of running out of cash increase.
Investors become more risk averse and whilst good businesses will always be able to raise money the valuations can be significantly below market value and entrepreneurs can end up with less of the business than they feel comfortable with.
Make sure you have a plan B. This would normally be running the business on a break even basis. This might mean having to make hard decisions, particularly around people, but the future of the company will probably rest on this.
If you are struggling to raise money go back to your shareholders and see if you can do a smaller raise as a bridge to better times. Give the good deal to the people who have supported you in the past.
How long would you spend doing due diligence and what do you look for?
Usually between 4-6 weeks. I have covered a lot of what I look for above but in the ‘formal ‘ part of DD I would look at the following: – Financial information (P&L, Balance Sheet, cash position and cashflow projection etc) – Any IP that is in place – A business plan – Any legal docs (The proposed investment Agreement, Articles of Association, Shareholders agreements if they exist)
You’ve written an award-winning book, The Money Train, on what young businesses need to know about investors. Why did you decide to write this?
I wrote the book following a particularly drawn-out and bruising fundraising process. It struck me as unfair that just at the point where a young business is at its most inexperienced it is often negotiating with very experienced investors who may insert clauses that look harmless (or may not even be understood) that come back to haunt the business in the future. I felt that a guide to preparing for the investment process might be useful. Shedding light on what some of these clauses are and how to resist them. It seems that a lot of people have found it really helpful.
The angel investment world is still overwhelmingly male. Data from the UKBAAsuggests only 13% of business angel investors in the UK are women and it is a similar picture worldwide. Lack of access is one of the biggest challenges of gender inequity. There is an urgent need for more successful women to speak up and show others the way. One of the key reasons is that more female investors means more female entrepreneurs are likely to receive support.
One such woman is the incredible Marla Shapiro- CEO of HERmesa – a UK based angel syndicate, 2022 finalist Angel Group of the Year at the UKBAA awards, investing in extraordinary female (co) founded start ups. We speak about her continually growing portfolio of exceptional women led start-ups, her drive to support female backed business and what she sees as the fundamentals of a founding team.
What has led you to angel investing?
I find angel investing incredibly interesting! You have the opportunity to meet fantastic entrepreneurs, learn about new technology / products / scientific innovations and, to play a small role via your capital and expertise in making these innovative businesses a success.
You back businesses (co-)founded by women. What drives you to do this?
I invest in women-(co)founded businesses because women founded companies return more and generate greater returns to investors. Angel investing is about making money: you make more money investing in women founded businesses and alongside women investors.
At HERmesa, we call this the “diversity dividend” and share the underlying data on the performance of women funded and founded startups via our website.
You operate as a syndicate, with the aim of not only supporting female founders, but also increasing the number of female investors. Why is this important to you?
The statistics about women investing and receiving early stage financing are dire: 13% of the angel investors in the UK are women and women (co)founders receive 5% of early stage financing. This means that the world is being built by men to meet the needs of men. If women do not have a seat at the table to invest in companies of the future, we get a reduced range of products & services. If all investors are the same (e.g. white men from the southeast of the UK that work in the City), how are we going to get solutions that meet the needs of the entire population!? If you don’t invest, you are letting someone else build your future.
And, if women don’t invest, they are excluded from private wealth generating opportunities vs their similarly situated male peers. While angel investing is risky, with an appropriate portfolio strategy and risk management, you can generate meaningful returns. Why should this be available only to men?
Finally, while I don’t think it is the responsibility of women investors to solely solve the lack of funding that goes to women entrepreneurs, it is true that women investors back women founders at a disproportionate rate (~40%) vs their male peers (~2%).
What do you do to support more women to become angel investors?
HERmesa angel syndicate does a lot to bring new women into angel investing! We support new angels in a variety of ways:
Ongoing education sessions on all topics re: “how to angel invest”
“Buddies” – pairing new angels with experienced angels to ask ‘silly’ questions (even though there are no silly questions! And we work really hard to create an open, curious culture at our events)
Setting a very low minimum ticket size of £2k/deal. This low ticket size allows new investors to dip their toe in the water with a limited amount of capital at risk vs the typical syndicate which requires a £10k minimum ticket. HERmesa are huge believers in “learning by doing”. You can’t be an angel investor unless you invest; and you can’t learn by reading about angel investing. The best investors learn from experience and by having ‘skin in the game’.
We have found that the lower ticket size is not just attractive to new investors, but also to investors earlier in their careers, including entrepreneurs who have not yet exited their business. This low ticket size lets HERmesa bring a huge amount of talent, expertise and support to our investee companies, and from these ‘operators turned angels’ we are becoming known as high value add investors for founders.
What is your most active area of interest?
HERmesa is sector agnostic; we invest in consumer product, technology and deep science companies operating across B2C and B2B. (This IS a wide range; fortunately, we have a fabulous community of investors who are sector experts and help us review all deals). But, one theme that tends to run through our investments is “impact”: solutions to the climate crisis, pollution reduction, access to justice, etc. At least 50% of our businesses address impact in some way.
What characteristics do you look for in a founder/founding team?
When I first started angel investing, I found it immensely frustrating when experienced angels would tell me “great founders have a special something; you know it when you see it”….but, having now met hundreds of founders, I think it is true! But, to break this down, I would say that great founders/teams:
Have strong founder/product or market fit. Ideally this means that you have deep experience in a sector that has led you to creating an innovative product and that you have the network to find the first paying customers. Or you have some killer functional experience that will allow you/your team to out-execute others.
In addition, we look for thoughtful people who ask for advice. Founders get a lot of advice; not all of it valuable! But, knowing when to put up your hand and ask your investors for help and the maturity to weigh the responses goes a long way towards building a successful company.
Finally, we really try to invest in nice people. We are putting our own money into the business and we are going to be with these founders for the next 3, 5, 7 years. Life is too short to invest in jerks!
What turns you off on a pitch deck sent to you and why?
Small font where everything is crammed onto the page. Investors want a super clear, concise story that gets us excited to ask more questions and set up the first call. As one of our members says, “pitch decks are meant to be commercials, not novels!”
What has made the biggest difference among your successful investments – traits or tactics that have made the biggest difference in the startups?
The best startups are characterised by really strong founders, who have the ability to hire top talent / top performing teams. As well, our best companies show flexibility and adaptability in terms of doubling down on things that work, stopping doing things that are not working and a willingness to change the business model if necessary.
As a serial entrepreneur yourself, what is the one piece of advice you would give to your younger self starting out on your journey?
Try to see failure as a growth opportunity; not just as a crushing disaster! I once was told to write a “CV of failures” and it was the best thing I ever did. Only by looking at where I failed, where I was fired, where I didn’t get a promotion was I able to see the doors that then opened up. If I had succeeded at my first job, I would never have taken all of the other steps that led me to becoming an entrepreneur and investor today.