1. Angel Investing: am I ready?
Curious about angel investing, but not sure you have what it takes? Angel Academe investor Jodie O’Keeffe outlines the criteria you will want to consider.
1. I’ve read the fine print
To receive a business plan or make an investment without professional advice, you need to self-certify as a high net worth individual, according to FSMA regulation. A high net worth individual has a net income over £100k or net assets above £250k not including pension fund or private residence. Before you attend a pitch event, you’ll need to have duly signed your form and returned it to the organisers.
2. I’m a team player
To maximise efficiency and enjoyment, angels often do deals as a team. Joining a syndicate like Angel Academe provides deal flow, support and structure, in exchange for your contribution and cooperation. As an angel investor, you’ll follow the processes in place to guide a deal from initial pitch to round close. You’ll work as a group with other angels and the entrepreneurs to complete due diligence and come to a consensus on deal terms. There’s room for healthy debate, and every deal is unique, but every deal requires cooperation and a willingness to make a fair contribution. Indeed, this is part of the attraction of joining a syndicate — completing due diligence alone can mean a lot of work and very little joy.
3. I can add value
Syndicate members offer their time, energy, skills, professional experience and networks to the group and the entrepreneurs. Whatever you can bring to the table will strengthen the knowledge and experience of the whole group. Angel Academe members include current and exited entrepreneurs, senior professionals and people enjoying portfolio careers. The value of the group lies in the breadth and depth of the collective experience — something each member draws on and contributes to. We invest in businesses from a broad range of sectors and rely on the advice of members and their networks to support investment decisions, and later our investee companies. In general, if you’ve been able to self-certify and you have the inclination to become a business angel, chances are your professional experience and business nous will be a welcome addition to any investor syndicate.
4. There’s room in my financial plan
Guidelines on minimum investment amounts vary across syndicates but expect to contribute £10,000 to two or three deals per year as a business angel. This is a portion of your assets you won’t need to call on at short notice. Instead, you may even be interested in contributing to follow-on funding rounds supporting the same business as it makes its way from initial angel investment to later funding rounds and eventual exit. This process might take 7–10 years, so it’s best to feel comfortable with the idea of your angel budget being a long-term commitment. Keep in mind though that these investments are usually incentivised by the Enterprise Investment Scheme, or EIS, but more on that later.
5. I’m ready for risk
There will always be a reason to decline an investment opportunity. All early-stage, high-growth businesses carry risk. Understanding, accepting and mitigating this risk is an inherent part of becoming an angel investor, as is striving for reward. Businesses pitching to Angel Academe are sometimes pre-revenue, at proof of concept stage or offering only a minimum viable product. While their business ideas should always compelling, there will be other aspects of the business that are under-developed and questions the founders just don’t have answers to yet. Partnering with them on that journey means taking on their risk and offering support to minimise it where possible. There will be other portions of your investable assets that are managed under low or moderate risk conditions, usually offering a low return. Your angel investments are high risk, that is the financial nature of the opportunity — high risk with the possibility of high reward. What can be guaranteed, however, is the rich personal and professional experience you’ll gain from joining a syndicate, backing early-stage businesses and helping them grow.