How to Find Your Guardian Angel: Lessons From an Angel Investor

“Angel investor.”  

It’s a catchy term, but what does it really mean? 

I’ve pulled together a whistle stop tour guide for those on the hunt for investment. And, it’s simple. Angel investors come from all walks of life and no two are the same. I’ve been an Angel investor for many years now, and I currently have fourteen investments. It’s an important part of what I do. I love my work at Google, but I also have many outside interests. Investing is of course a financial move and a great way of diversifying risk. But for me, it’s really about people.

I made my first investment for sentimental reasons. I knew a group of people back home in New Zealand and I thought they were interesting and had potential, and that’s why I decided to back them. Since then, I’ve grown as an investor. Angel investors don’t invest in a business, they invest in a team.

As an Angel investor, I’m asked a lot of questions about what I look for in founders, and what lessons I can share with budding entrepreneurs. So here are some of my top insights into the world of Angel investing.

1. What makes the perfect founder?

As an Angel investor, I’ve heard some farfetched proposals, but the idea is not the first thing I consider when I’m approached about an investment. The idea can be the best in the world, but if I don’t trust the team, then it doesn’t give me faith in the business. The founder and the founder team are always crucial to whether Angel investors decide to back.

Here’s an example of a great founder. Two years ago I invested in Aidan Cramer, the co-founder and CEO of Stride, a recruitment start-up. For me, Aidan encompasses a lot of what I look for in founders. You have to be gritty, determined, entrepreneurial, agile and a good listener all rolled into one. You also need to show that you’re resilient and can persevere even when times are tough. Conviction is the number one quality I look for, but on top of that, you need to be humble. Don’t be a diva! Being reliable and down-to-earth is far more desirable, and it shows that you’re going to offer a collaborative working style. I’d rather invest in a rock than a rockstar...

A young entrepreneur who has surrounded themselves with experienced advisors is an also an attractive prospect to an Angel, and I always look closely at what those advisors have brought to the business, and whether they invested.

2. Don’t be ashamed of failure.

Let’s talk about failure. People - and especially people in business - love to celebrate their successes, and why shouldn’t they? But why are we so nervous to acknowledge our failures? Failure is a scary prospect, but it’s also a natural part of business (and life!). We’ve all seen the statistics - around 20% of startups fail in their first year. But failure doesn’t have to be the end. In fact, it’s a priceless learning curve, and we should wear our failures like a badge of honour.

Take Aidan, for example. We have regular catch-ups, and last time we spoke he’d been through the ringer. Heading up a young company in the midst of a global pandemic isn’t easy. I congratulated Aidan on his badge of honour. You’re not a true entrepreneur until you make your first failure - it’s the failures that teach you the most. Now Aidan is in a better place than he’s ever been - he's more grounded, resourceful and experienced than ever. I would have preferred to get my money back, but that’s angel investing - high risk / high return - it’s a portfolio game.

Being able to pick yourself up, learn from your mistakes and move on to the next idea is a huge asset, and a good investor will be able to spot that a mile off.

3. Ask yourself the hard questions.

So you’ve gotten this far. You’re a resilient, humble and agile entrepreneur with an experienced team. But what about your company? Before you approach any Angel investor, ask yourself these questions:

• Is there a market need for your company/product?
• Is it differentiated?
• Is it scalable?

Think of these questions as the necessary but insufficient conditions. There’s a lot more to any business, but without these conditions, an Angel investor won’t be willing to give you the time of day, let alone a big chunk of their money. In an investment meeting, an Angel will go straight to the challenges and weaknesses in your proposal, and they will be quick to sniff out uncertainty. But if you can confidently say “yes” to these questions, that’s a good start.

4. Some Top Tips:

• Try and tap into an Angel network. Most established Angels will be part of a syndicate in some way, and it’s far better to have one call with fifteen angels than fifteen calls with one Angel. This can be daunting, and yes you may feel like you’re in a dental exam - with fifteen dentists! - but you need to be able to tough it out. And once you’ve tapped into an Angel network, the reach it gives you could really pay off.
• Learn to network. Use platforms such as LinkedIn properly - and use it to your advantage. Around 75% of my leads come through LinkedIn. People ping me all the time saying, "Hey, we're raising - how about we have a chat?” and if I like the sound of their idea, I will follow up.
• Cold calling DOES work. Send out some emails, call up some investors. It’s tiring and it’s hard work, but it’s worth it. Just remember that investors get countless emails every day, so don’t expect them to get back to you instantly - or even at all. Nine times out of ten they won’t, but that one time could be a game-changer for you and your business.
• Don’t ask an Angel investor to sign an NDA. You’re already asking an investor to give up their time to consider your early stage pre-product pre-revenue business - you don’t want to make it hard for them, nor do they want to take on personal liability for the benefit of considering you. It’s natural for a founder to be protective of their business concept, but insisting on an NDA is a real red flag to an investor. It signals that a founder is inexperienced. By contrast, when I ask an experienced founder team to share their investor information, detailed financials and P&L, they always do. Be confident and transparent and your would-be Angels will thank you for it and give you their time.

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It’s not easy finding an investor who’s willing to lay their money on the line for your dream, and the world of investing can seem incredibly daunting. Angel investors aren’t magical beings, however, they’re just people. Contact them and make that connection. Respect their time and experience, and demonstrate that you have some fight in you. Surround yourself with experienced people you trust, and who believe in your business in return. Be confident in your company, but be humble and prepared to celebrate your failures and successes Now get out there and find your new guardian Angel!

– Craig Fenton