Climbing the Angel Ladder

On paper (always a very dangerous jury), my three Canadian Investments have done better collectively than my 19 UK angel investments. I was discussing this with a good friend of mine who has been an active UK angel for some time and is someone that I think is very good at it. He observed that it wasn’t to do with them being Canadian, but to do with them being my most recent investments.

Upon reflection, this is true, but I also think it is the case that in Canada I managed to ‘enter the angel scene’ at the right level. Because of the way I first got to Halifax, I was only seeing the really good deals. Angel investing requires just as much networking from the potential investor as it does from the entrepreneurs looking for funding.

Most of the first deals I did in the UK were, in all honesty, deals that lots of other people had turned down. If you are a well connected entrepreneur or you have proven experience, you are not going to be doing the very expensive rounds in Angel networks. Again, interestingly, the last five companies I have invested in did not need to pay a broker or a network a fee. With the money being paid out amounting to as much as 12% in many cases, this is a huge amount of money to save and suggests that the best deals are elsewhere.

In the UK, I am slowly networking my way up the hierarchy (there is certainly one here) and I am getting to see better deals. I know this is true because the deals I still see through the ‘traditional route’ such as Angel events are very poor on the whole.

I try to be positive in these blogs and not just whine and complain about things. So what advice would I give entrepreneurs who are not well connected and don’t have lots of rich friends they can tap for money? My obvious answer is to get yourself well connected or at least get some industry expert/ authority to add real credibility to your business plan by endorsing it.

It is amazing how many times investors always say that it comes down to the quality of the management. If there are gaps in your management team – go fill them. At the moment, with the economy being the way it is, there are some great quality people who are underutilised. Now is a great time to get them on board your business.

And just do the plain old fashion intelligent networking. This means not going to networking events (they rarely work). And instead working out who you need to be speaking to and finding out where they will be. (Twitter is a great way to find out).

So just like angels have to network to climb that ladder to get access to the best deals, so do entrepreneurs.

Happy Climbing!

08
Sep 2010
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POSTED IN Business Practice General Commentary Investments
DISCUSSION 5 Comments
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  • http://www.andrew-crump.co.uk Andrew Crump

    Hey Permjot, intresting post. Good luck finding sound investments. I will show more detail on ours soon

  • Michelle

    This is a very interesting post. I agree, it's difficult if you're an entrepreneur looking for funding and are not well connected. You need to do your research and know the market so you don't end up paying a high percentage to brokers and networks unnecessarily. One avenue you could look into is advertising with a relevant publication – they're already well connected and some publishers don't charge commission; I know we don't. I work for AngelNews and we run investment ads in http://www.makinglifericher.co.uk, it's worth a look.

  • Permjot

    Great to hear new ideas to help fund raising

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  • Matthew Artero

    Your hierarchy networking will not get you the very best deals. Your advice is not relevant to the very highest quality deals as it only works for businesses that people already understand. There is nobody to network with who is interested in every new idea and there are no experts for new products that do not exist in the market yet.

    So how would one know that s/he should have backed the personal computer which was ridiculed as not needed? Or the telephone; which was turned down by the telegraph companies? Or the airplane which was turned down for three years until an investor from across the Atlantic took it on. When 300k automobiles were selling worldwide per year it was still said it would never replace the horse and car companies could not get bank loans.

    There is no identifiable network or industry expert for any breakthrough technology to turn to for investment or validation. There was no expert that told us mobile would grow faster and bigger than the PC and internet. There was no expert that told us mobile would cause someone to overtake Bill Gates as the richest man in the world.

    Just like you say your early deals were deals that other people turned down; so too were all the very best deals of the past.

    If an Angel wants in on the very best there is no networking shortcut for the Angel to take. The Angel will just have to break free from the circus of business plan and fast pitch competitions and have a dissecting study of the new technology and the market for it.

    Are you such an Angel? How high up the hierarchy do you intend to climb? If you’re serious about wanting the best, let’s talk.