How to make the most of angel investment
Two experienced angels share their insight
Having spent 25 years working in tech roles for large corporates such as DHL and IOT Telefonica, Bridget Connell (@bridget_connell) became an angel investor in 2014. She sits on the advisory board of Angel Academe (“a pro-women, but not women-only angel syndicate”) and works as a mentor and executive coach. She is also the founder of London-based specialist coaching consultancy, Thinking Partnerships.
As a business angel, she invests in early-stage technology-based businesses, where at least one of the founders is female. To date, these have included, Abundance Investments (an ethical online investment platform), Qudini (an app that enables consumers to more conveniently pre-book appointments with retailers), The Dots UK (“a professional network for people who don’t wear suits to work”) and Enterprise Alumni (a platform that allows large organisations to engage and harness their corporate alumni to accelerate recruitment, sales and brand advocacy).
Matter of choice
“My advice to businesses looking to raise investment is to choose your investors wisely,” she cautions. “The relationship with your investors is key and will last the lifetime of the business. If you find your investors tricky or challenging during the fundraising stage, imagine what things could be like if the business isn’t growing as planned.”
Connell says she likes to stay very close to businesses in which she has invested. Advocacy and sharing network contacts or making introductions are key to her involvement as an angel investor, she adds, with mentoring available too, where relevant. She explains: “The first thing I try to do after investing is amplify key messages and great news about the business. I encourage others to find out about the business, try their products or services, to help raise awareness.
“I also share my network of contacts, providing access to other corporates, sometimes clients and people who’ve been on the same journey – people who may be able to help open doors. As an investor, I’m happy to make those introductions, so the businesses in which I invest can gain from other people’s knowledge, experience and their contacts. This is the added value that angel investors bring which businesses need to maximise their benefits. It’s not just about capital, the right investor’s knowledge, experience and contacts can prove hugely beneficial.”
To make the relationship work, once you have attracted the right investor, as well as benefitting from their contacts, you should be willing to listen to their advice and remain open to alternative perspectives. “Regular communication between the founders and the investors is essential,” Connell stresses.
“Investors should receive regular updates, which don’t have to be lengthy, board level-type detailed documents, but they do need to provide key information on sales progress, customer numbers, any problems or issues, etc. If you want your investors to follow on and invest in subsequent rounds, and to provide help or contacts when you need them – make sure you keep them up to date. You won’t get maximum value from your investors if you only communicate when you’re fundraising again,” she warns.
Source of support
Jenny Tooth OBE is CEO of the UK Business Angels Association, the trade body for angel and early stage investing. It represents more than 15,000 investors in the UK. She has more than 20 years’ experience of facilitating SMEs access to investment, in the UK and overseas. An angel investor herself, in 2009, Tooth co-founded Angel Capital Group, one of the UK’s most established and active angel networks.
“Angel investment can be a valuable source of equity finance, but you must also tap into the angel’s business experience, skills and contacts,” she advises. “Usually investment comes from a syndicate of several angels, in which case, identify which one will be your key contact and main source of support post-investment.”
Ideally, she says, before agreeing the deal, understand what added value the angel can bring. “Establish what expertise you need to support your growth, whether it’s strategic advice in planning your development, support with financial management or HR, product development, access to customers or markets and general introductions,” she explains.
Tooth cautions against “over involvement”, but you should agree with the angel how much time they can give to your business. They may also take a seat on your board or have board observer rights and will always expect to receive regular progress updates, she explains.
“If your business is progressing well, angels usually offer further funding and can also mobilise funding from other angels and other sources of capital, such as venture capital funds. Angels offer ‘patient money’ and should not seek to force a quick exit. However, they’ll expect you to regularly review your strategy and plans for exit.”
Making the most out of your relationship with angel investors can be challenging at times, Tooth concedes. “But if you get it right, it can be a dynamic and highly positive experience – one that can really help you to turbo charge your business into next-level growth.”
- The UKBAA maintains a free online searchable directory listing more than 70 angel groups by investor type, region, sector and amount of finance.