Becoming a business Angel via a programme like Co, the Greater Manchester Combined Authority (GMCA) supported service linking syndicates of business angels, can be a great way to invest in the future of innovative high growth businesses and to widen your own business network.
To make the most of the time and the funds that you are investing we have gathered some expert tips and advice from our Angel team:
Invest in multiple deals: Co brings syndicates of Angels together to invest so the individual financial commitment is smaller but the wider pot is significant. This enables new Angels in particular to spread their risk and learn more about the sectors that they are investing in.
Listen to the experts: all our syndicates have a lead Angel; someone who knows the sector that the start up is operating in very well. Being able to tap into their expertise and industry contacts will be invaluable both for that investment and potentially for future ones you may choose to work with.
Develop a strong network: investing can be a lonely business but getting into a network like Co where you can sound out ideas and access your co-investor’s expertise can be an important way to stay a step ahead.
Do your homework: our Co team at BFS work with our investors to do due diligence on all of the businesses seeking investment. Looking at all aspects of finance, legal, management and commercial issues will help to highlight any problems and to speed up the investment process.
Think about your exit: before you get into a business you need to be thinking about how and when you might exit it. This will be influenced by a number of factors including market changes, how many companies the angel is investing in but will usually be between five and seven years.
As collaborative investment models like Co grow in popularity and success, research is highlighting this breed of syndicate based model as the best way forward for businesses seeking equity investment.
Bringing sector expert angels together in a syndicate is evidence of a number of factors that have been affecting the investment market over recent years. The venture capital industry is contracting, investors are more risk averse and there has been a real shift to larger and later stage investments.
For individual investors there are many benefits to working with their fellow angels in a syndicate – the opportunity to spread their money, reducing risk and providing exposure to a better range of investments, professional interaction with their peers and the support of a professionally managed funding process.
Similarly, by accessing an angel syndicate the entrepreneurs and businesses seeking investment can access the expertise, funding and contacts of a wider group with the potential to access follow on funding if required.
The Angel investment market has matured and the development of services like Co is likely to increase in demand as other routes to investment become more risk averse.
And there is academic as well as anecdotal evidence to support this. The universities of Glasgow and Edinburgh recently undertook a detailed examination of investment syndicates in Scotland, which suggested that angel groups created a more formal structure to the process by managing and channeling the finance more efficiently and effectively.
All investors are different and will have their own reasons for making investments that will shape their portfolio. But a lot of what the investors in our Co syndicates and VCs generally are looking for in a pitch from start up businesses will be the same.
Momentum: investors dream of finding the next big consumer product and without momentum driving your sales, getting an Angel interested will be hard. If you can demonstrate evidence of customer adoption –number of users, channel partners, sales at events, social media response – that illustrate how you can drive revenue scales, investors will be keen to know more.
Management: a critical part of any pitch to Angels is that they buy into and have faith in your management team. You don't have to become best friends with your investors during the pitch - there may even be friction - but you need to really prove to them that you and your team have the experience and the expertise to make this business a success.
Market: there has to be an audience to buy your product; or there will be no successful product. Your Angels need to know just how you will be able to penetrate a potentially crowded market with your product or service. Angels are looking for fast moving and large markets which is why tech and digital start-ups are so attractive; because they offer the potential to grow much faster and bigger than say an FMCG product. Think global rather than national too; online markets now open this up to more start-ups than ever.
Money: most Angels will be looking to own a significant stake in your company and if you start doing well they may want to buy more. Increasingly investors are spreading their funds across a range of companies, something that Co enables them to do by matching them with other Angels in syndicates that share the risk and the reward. It is human nature that an investor will be more interested in you the more he has invested but it is up to you to make your business worth their time and money.
A business Angel, like those we work with in our Co Angel programme, does not only invest cash into a start up or early stage business but also a wealth of experience and knowledge to help the business grow.
Our Angels make investments as part of a syndicate, which not only minimises their individual risk but also enables them to work with a wider range of businesses.
With £850m invested by Angels annually in the UK, what is the attraction of becoming an Angel? There are of course many examples of investors making their fortunes from spotting the Next Big Thing but even though every new business will not hit those levels, investing in a successful young business can still deliver both better returns than a savings accounts and potentially provide tax relief for the investor. For most Angels though it is more about the personal satisfaction they gain from seeing a business learn, grow and succeed as a direct result of both their equity and their experience, rather than focusing on the financial reward.
Many Angels have successfully run their own businesses and will bring with them decades of experience, and an understanding of what it is like to be in an entrepreneur’s shoes. Becoming an Angel enables them to share the skills and expertise they have spent a lifetime developing with young, ambitious businesses that are hungry to follow in their footsteps and grow.
The Angels we work with talk about the return on their investment as being enormously rewarding and a great way to keep at the forefront of developments in their chosen sector. Becoming an Angel within a syndicate like Co also puts you at the heart of a valuable business network of your peers.
For anyone who enjoys putting their skills and talents to great use and being part of a vibrant business community becoming a business Angel can be a great investment in the future of British business.
Growth is an important part of all businesses but it isn't always easy to achieve. Here are 5 short useful tips here for you to consider when trying to achieve growth.
1. Review your business plan regularly
Hold planning meetings every 3-6 months that involve key members of staff. Do you need to recruit more people, spend more on marketing or prioritise different areas of the business?
2. Consider seeking investment
If you need an injection of capital to help take your business to the next level, there are now many options, from the banks to crowdfunding and business angel investors. Programmes such as Start Up Loans, can often help if the banks can’t.
3. Embrace digital
Traditionally digital or IT was part of the operational side of a business but today, digital should sit at the heart of every enterprise and business model.
4. Work with a mentor
Research has shown that businesses that seek support are much more likely to thrive and grow. Mentors are simply business people with the practical experience and expertise to help you make the right choices for growing your company.
Getting a product in front of people can often determine success. Make sure you have a clearly defined marketing and communications plan that includes PR, advertising, direct mail, online and social media.
Angel investors all have very different motivations, passions and reasons for wanting to invest in a business. And just as many for not investing.
Our Co Angel team works with many investors and VCs and we wanted to know just what can turn them off in a pitch….
Pie in the sky profits– we’ve seen it time and again on Dragon’s Den and other investment programmes. Figures plucked from the air that out-do even the market leader. Any forecasting has to demonstrate that you’ve done your research and are being realistic.
Fighting feedback – after any pitch, feedback from seasoned business people is the most valuable thing that a start up can get. Expect good and bad, take it in your stride and listen up. If you’re right and they’re wrong any investor will be the first to congratulate you.
Not understanding the investor’s perspective – an Angel will be looking to recoup a significant multiple of what he is looking to invest. They know that it will sometimes be more and sometimes less but a start-up is a big risk and they need to see where that return will come from.
Fact not fiction – investors don’t have time to listen to a long drawn out pitch with very little useful information. Stop spinning information, be honest about what you’ve achieved and stick to the facts.
Our Co team is here to help you pitch for investment and avoid these pitfalls. So if you have a great business concept but can’t seem to get anywhere with raising capital we can connect you with sector specific syndicates of business angels, looking to invest in businesses throughout Greater Manchester and the North West.
Or if you’re looking to invest in exciting local businesses we can help you find an idea to invest in as well as bringing you together with other like-minded investors to pool your skills and contacts and to invest in a wider range of companies to manage your risk.
Investment in new business carries high risks as well as the possibility of high rewards. It is highly speculative and potential investors should be aware that no established market exists for the trading of share in private companies. Before investing in a project about which information is given, potential investors are strongly advised to take professional advice from a person who specialises in advising on investments of this kind. Co Angel Investment Service cannot advise on the merits or risks of investments and is not authorised to arrange transactions or circulate offer documents.