Angel Investing and the Direction of Drift this Autumn

With the advent of early stage investing taking on record proportions, and amid fears of an equity gap over the last year, angels and UK investors are stepping up to the challenge to completely close this gap.

There are two symbiotic communities making this growth possible: the Angel Investors and the intrepid UK entrepreneurs. This remarkable movement of cash to ideas made me turn my thinking to the angels - who are they, what do they want, and what creates the special alchemy where angels gather and thrive? 

The majority of angels have been wealth creators in their earlier careers, often in enormous proportions. They will have sweated their assets with much of the perspiration associated with risking it all to achieve the much vaunted exit. Among this group are many serial entrepreneurs with multiple exits to their name. As such they are an inspiring generation of role models to the budding entrepreneurs of today. 

Once an entrepreneur has cashed out, many hit the beach for a while only to be drawn back to the quest to be involved with a successful business again. Some take frontline leadership roles and some prefer to invest in and work with up-and-coming entrepreneurs. Ultimately this is an ecosystem which is all about wealth creation, which drives a great economy.

As an investor it can be a lonely challenge, it’s just you and your money risking it all on the frontline. But before you invest, ask yourself these questions:

• Where are the great investments?
• How well prepared are the ventures to take in investment?
• What about due diligence?
• How could a crowd environment help me, the investor? 

As Beauhurst reported in their 2017 edition of The Deal “As is becoming the norm, crowdfunding platforms have dominated 2017 by deal numbers”. This is best portrayed by the performance of the retail investing platforms such as Crowdcube and Seedrs and at the other end of the investing spectrum, the Syndicate Room. Here there are some useful clustering of services where ventures turn for investment and investors can benefit by being signed up. 

Each platform will have its own process of on-boarding ventures and most are regulated where the details are checked and signed off as: fair, clear and not misleading. To meet with regulatory requirements, investors must also self-certify as either a sophisticated investor or high net worth individual.

The directors of the ventures submitting their documents to Stakeholderz and other investing platforms, have to vouch personally for the accuracy of this information. This in part, takes care of a large element of the due diligence process with the production of traceable related information. Platforms do not normally sign off on a venture listing unless they are also convinced that the information is fair, clear and not misleading.

Some platforms offer a ‘lead-investor’ model, yet with the democratisation and transparency of Equity Crowd Funding (ECF) this is becoming less relevant. As with most platforms, all deals are available to each shareholder to interrogate to their satisfaction.

For the investors the key will be those platforms focused on long-term success as many investments are tied up for 3 -7 years. This plays forward to the curation and selection of the right ventures to list. A hugely defining process for the long term reputation of the platform, like Stakeholderz. Once the investment is put in there is a limit to what most platforms can do to influence the ultimate success of the venture.

Many angel networks are based on an ‘inside track’ where the interesting investment opportunities do not reach the wider investment community as the shares are fully subscribed before they get there. Many investors would claim that they are looking for that “unfair” advantage. That said - who would not want to put their money into the very best ventures available?

There is also the need to offer a sense of belonging and community, where investors can get to know each other and trust a collective decision making process that brings ventures to a fully funded position on time. The human interaction and the ability to pick up the phone and discuss the latest management reports or a possible follow on investment should never be underestimated and more actively encouraged.

Harnessing the skills of the investors to drive growth, success and exits is a determining part of this sector’s future. 

I will be publishing a supplementary blog to this based on comments. Please join the debate by liking or commenting.

Stakeholderz combines equity in the range of ￡300k - ￡1m, senior executive talent and knowhow to ‘tech’ ventures. It draws on a proprietary register of a growing 8,000 to deliver this and through precision search it can deploy skills and expertise. This register and its network also provides a cornerstone to its process to find a lead investor as well as exciting ‘off market’ ventures. To register as a venture looking for funding or to register as an investor, visit https://bit.ly/stakeholderz 

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