Why Angel Invest? There's nothing else quite like it
Over the last few years I’ve built up a small investment portfolio and my aim is to have investments in 100 startups. In this post I’ll give some background about why I think being an Angel Investor in startups is a good idea, and a fascinating and exciting space to be in. And to help you make better decisions when it comes to investment.
What do we mean by the term ‘investing’?
Investing is a broad term and will be used more and more. I predict that, in a similar way to the last decade ending with everyone calling themselves an ‘entrepreneur’, the 2020s is going to end with everyone calling themselves an ‘investor’.
Venture Capital (VC) is a catch-all but a good catch-all for Angel Investing. It’s capital for the (ad)venture. The type of companies that the investment goes into are startups; newly formed businesses that are started with the aim of achieving massive success and impact. Think Facebook when Mark Zuckerberg was still at Harvard, Uber when it was one of Travis Kalanick’s side projects, or Airbnb when they were selling breakfast cereal.
As with many adventures though, Angel Investing is risky. Very risky. For every Uber there are thousands of startups that fail to get anywhere close. But the thing that people often forget when thinking about how risky investing in startups is, is that the maximum amount of money investors can typically lose is 1x whatever invest. And with the Seed Enterprise Investment Scheme and the Enterprise Investment Scheme tax breaks for UK Angel Investors it’s often less than that.
With risk comes reward and the upside for Angel Investing can be huge. For example one angel investor who put $25k into Uber in their 2010 seed round turned out to be worth over $124m at IPO (May 2019).
Why become an Angel Investor? And why now?
I first started learning properly about VC at Imperial College Business School when studying for my MBA. I studied Software Engineering at Durham University during the early years of Facebook, Gmail and Twitter. I programmed enough code to know how websites like those worked and the incredible impact they could have. After Durham I moved to London and worked as an Analyst and Architect for some software companies. I worked at three different companies inside two years. I moved around a lot because I was hungry to work hard but wanted to have impact and get the rewards for that hard work. After a while I realised that it wasn’t going to happen.
So after joining the third software company in 2008 I started exploring the idea of gaining an MBA to give my career a boost. I was accepted at Imperial College Business School and that changed everything. Studying Software Engineering at Durham meant a classroom of 32 other male undergraduates. No women. And no one really talked to each other that much, except online. Business school was thankfully more diverse. I met people from all sorts of different industries and stages in their careers and learnt a huge variety of subject matter. Durham was pretty much a maths degree with a bit of programming whereas Imperial was almost two years of strategy, accounting, marketing, economics, statistics, organisational behaviour, corporate finance, entrepreneurship, private equity and Venture Capital. VC was by far my favourite — the chance of having a small stake in a bunch of young, fast growing, virtually limitless potential companies was certainly appealing.
With risk comes reward and the upside for Angel Investing can be huge.
After graduating in 2010 I got a job with a small investment and advisory firm in London. I was taken on to work on London’s ‘Gateway2Investment’ programme, a GLA and EU backed programme to help London’s (mostly tech) startups become more investment-ready. In the next 18 months the team helped 52 companies raise over £23m in equity investment. This was right at the start of the latest wave of entrepreneurship. Now it’s common to be an entrepreneur, but back then it was a bit weird — why, just after the credit crunch, would anyone want to start a startup?
What I saw during 2010 and 2011 led to me co-founding 9others. What started over one meal for me and ‘9 others’ in December 2011 has grown into a global network of over 4,000 attendees in 47 cities around the world. At each meal entrepreneurs share a challenge and help each other out and it’s through these trusted relationships that drives everything I do. It’s because of 9others that I’ve met the founders of Uber, CityMapper, what3words, OneFineStay, Stripe and many more. No matter what happens (even a global pandemic) I will always be able to host a meal with 9others.
Throughout 2012 and 2013, I caught the bug for investment. In 2013 I left my job and struck out on my own, consulting with startups and some big companies that wanted to learn from them.
In 2016 I co-founded Dot Matrix Group (DMG). DMG is a syndicate of Angel Investors (68 at the time of writing) with a growing portfolio of startup investments. The investment opportunities typically come from the 9others network as that’s where I can get to know people, help out and learn how they operate and conduct themselves. We work hard to add value with the network and expertise of ourselves and DMG syndicate members.
So far so good?
Getting to this point has taken 10 years. A lot of it has been pretty gruelling but I’ve absolutely loved it too.
What I want to do now is help more people explore the possibility of becoming an Angel Investor by understanding the decision making process you need to go through.
There’s lots to consider: There’s deal flow (getting visibility of enough opportunities), there’s access (being able to invest in the hot deals) and being patient and having good judgement (balancing gut feel vs hard analysis).
So why do it? For me it’s the opportunity to contribute to and learn from some of the smartest people in the world. And with that there’s the chance to get a return unlike any other.