What is angel investing

What is happening to Valuations and Funding Rounds in 2023?

What is happening to Valuations and Funding Rounds in 2023?

Funding Rounds 2023

2021 was a year of astronomical growth and, simultaneously, the beginning of a tragic downfall for many startups. That year saw some of the largest funding rounds and highest valuations in history in the VC world, with Discord raising $500M, Databricks raising $1.6B, and Gorillas raising $1.3B.

To illustrate this point, we looked at data published by Crunchbase about the state of the market, funding rounds, and valuations. Crunchbase analysed in this article the “U.S. funding from Series A through Series C between 2018 and the first half of 2022 to look at average and median check sizes to see how they have changed.”

Despite valuations not falling in the first half of 2022, according to Crunchbase data, why do VCs feel like:

Kirby Winfield, Founding General Partner, Ascend VC: “Gotta be like 80% no longer worth $1 billion if you’re using public market comps. I think maybe 5%-10% will fail in 2023, but maybe 40% by 2025.”

Ba Minuzzi, Founder and General Partner, UMANA House of Funds: “We kicked off 2022 with five portfolio companies that had ‘unicorn status’ and two of those have already lost that status. I believe this data is indicative of the overall theme — that two out of every five unicorns will lose, or have lost, their $1 billion valuation. I do see this trend continuing in 2023.”

We are also observing headlines such as this one. In October 2021, Gorillas raised a $1 BN, but less than a year later, TechCrunch posted another article about Gorillas planning to lay off 300 employees and struggling to stay afloat due to lack of funding. Gorillas shared that the reason why they are laying off 300 people is that “it seeks to shift from “hyper growth” (burning tons of cash to win new customers and expand its operations) to “a clear path to profitability.”

So, what happened and how can a company that has raised $1 BN be near bankruptcy 8 months later? And why, despite all-time high funding rounds, do startups such as Gorillas seem to struggle with cash? Gorillas was eventually acquired by its competitor Getir at a valuation of $1B, a nightmare scenario for VCs.

What are Valuations?

To understand what is happening in markets with funding rounds and valuations, we need to go back a few steps and understand what a valuation is. How do VCs and founders decide what a startup is worth and, most importantly, how much it is worth?

We reached out to Joe Kinvi, who specialises in the FinTech industry and is currently working at Paystack in Financial Partnerships, a Community Manager at HoaQ, and an angel investor. Previously, he used to be the Head of Finance at Touchtech Payments, which was acquired by Stripe and later joined Stripe to work in Growth.

Joe shared with us why valuations matter:

“Valuations dictate the potential return for an investor. 

This means that the lower the valuation when you invest, the higher the upside when you exit. For example, when you invest $10K in a company at 1M and the company exits at $10M, then your return is $100K. However, if you invested the same amount at a $500K valuation, then your return would be $200K.” Please note that Joe is using a simplified example and he is not considering the impact of complex investment ideas such as dilution or deal structures.

Joe continues: “The importance also matters depending on the stage of the company. Valuations can be broken down into art and science.

Valuing startups at a pre-seed stage is an art. Art is subjective and appreciated depending on who’s looking at it. Pre-seed and seed valuations are often the same.

Valuing a startup during a Series A and upwards is a science. Science is 1+1=2. Investors are able to use numbers and other relevant benchmark and market data to arrive at a pretty accurate valuation of a company. For example, a company making X amount in ARR, with Y multiple in their industry should be valued at Z.”

How did this happen?

“The market is resetting again from its early 2022 highs but this height was mostly driven by a lot of capital chasing many little deals. At the growth stage, you have founders with lots of term sheets, meaning that they can inflate their valuation and give the deal to the highest bidder. 

It’s simple economics: the higher the demand, the higher the price when supply is limited. Valuations are readjusting because investors have more options to generate a return on their capital (fed increasing the interest rates to cool inflation) and many are quickly realizing that many companies will never grow into the valuations that they raised at. We’ve seen instances where some companies are worth less than what they raised and this has been a cause for concern (Bird is a great example and we will be discussing Bird in the next section of this article). While there is still lots of dry powder (some are calling it damp powder), investors are more cautious and are reverting to valuations fundamentals, after ignoring them for a couple of years. 

Valuations will continue to decrease at the growth stage (post series A) while we see more growth investors move downstream to Series A and the seed stage. This is going to put more pressure on seed stage investors but could be good for angels who invested at a friends and family round or pre-seed stage. We haven’t seen much movement in pre-seed and seed-stage valuations due to the art vs science dilemma. With growth investors moving downstream, valuations at pre-seed and seed can quickly become inflated, making it more challenging for existing angel investors to follow up on their existing investments. If there are liquidity options for these investors, they can earn a decent multiple on their money and recycle that capital into other early-stage deals.”

So what can we expect?

Many startups, such as Gorilla and Bird, are suffering due to changing market dynamics. Bird, an e-scooter company, is facing potential bankruptcy, according to the Financial Times. Venture capital investors have poured more than $4bn into loss-making e-scooter rental companies over the past five years, creating a bubble that is now bursting.

The Financial Times reports

E-scooter rental pioneer Bird has warned it faces possible bankruptcy within the next 12 months unless it can raise more cash, in a sign of a dramatic change in fortunes for one of the hottest tech sectors of recent years. Bird became the fastest start-up to reach a $1bn “unicorn” valuation in 2018, but is now fighting for survival after warning investors it had overstated its historical revenues by tens of millions of dollars.

Venture capital investors have poured more than $4bn into lossmaking e-scooter rental companies over the past five years, according to investment tracker Dealroom.co, fuelled by low interest rates and a wave of hype that small electric vehicles would reshape urban transportation.”

As mentioned Gorillas and Bird is going to be one of many startups that will be facing similar fates. 

Future market trends for valuations?

The glory days are over.

The FT reported European tech groups lose $400bn in value following funding crunch. No more peak valuations as VCs have been reporting write downs to their LPs across their portfolio. As a result many startups have been raising downrounds, bridge rounds or sadly closing down.

As valuations reset, deals will become less competitive, giving GPs more time for due diligence and getting to know the founders. In all honesty, after cases such as FTX along with falling valuations, LPs will be putting pressure on GPs for results. Additionally, we can expect to see more bridging rounds for startups, so they can avoid running out of cash and make it to the next round. This will help them achieve sustainable growth and avoid bankruptcy. Don’t be surprised to see startups raising enough cash to survive for the next 24 months + to avoid fundraising in this unfavourable climate.

GPs will also be forced to be more selective in their investments, as well as more strategic in their approach. Companies will need to make sure they have a sound business plan and the right capital structure to survive the changing macro environment. Moreover, entrepreneurs should be aware of the need to be flexible and adjust their growth strategies accordingly to remain competitive. 

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    The 3 biggest mistakes angel investors make when investing in startups

    The 3 biggest mistakes angel investors make when investing in startups

    The 3 biggest mistakes angel investors make when investing in startups

    The 3 biggest mistakes angel investors make when investing in startups

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      What does success look like for an angel investor?

      Is it investing in a unicorn like Uber? Or maybe investing in entrepreneurs from your community. Is it directing more funding to female founders? or maybe successfully raising a VC fund off the back of your track record?

      To be honest any of the above could be true for you. It all comes down to your motivations.

      Let’s take a look at what Harry Stebbings, General Partner at 20VC thinks

      Andy Ayim, founder of The Angel Investing School replied:

      In Harry’s post, we can see as a Venture Capitalist his motivation is about making a return from his portfolio of startups. So his advice to angels is really motivated by his VC experience. 

      However, Andy rightly pointed out that Harry’s post represents just one motive, which may or may not be yours.

      Angel investing is personal finance. Big emphasis on the word personal. Your personal motivations drive what success looks like for you. 

      Nevertheless, despite the many different motivations and visions of success, all angel investors are vulnerable to making the same mistakes.

      Throughout this article, we will walkthrough the 3 biggest mistakes. 

      One of the biggest mistakes we see beginner angel investors make time and time again at the Angel Investing School is the misallocation of capital. New angels are often so passionate and keen to invest in their first startup that they forgo some of the most crucial fundamentals of investing.

      We see lots of excited angels who set off on their journey and either invest their money too quickly, invest money they don’t have or have no money to follow on their successful startups. 

      Do not panic though. Capital allocation is the most challenging aspect of angel investing and we want you to get it right! Below are the 3 most common mistakes angel investors face when allocating their capital and how to avoid them.

      1) You invest your money too quickly 

      Becoming an angel investor is a very exciting time. There are so many different types of founders, startups and ideas in industries you have probably not even thought about. It is easy to fall into the trap of wanting to invest in every founder who shares with your their revolutionising startup idea. We get it! Staying rational and disciplined is the hardest thing for a beginner angel investor. However, what happens if you spend all your money at the beginning of your angel investing journey there won’t be any left. 

      Imagine you saved up £30,000 of your hard earned cash and started angel investing, you meet an inspiring founder that leaves you excited, curious and with a fear you will miss out if you don’t move quick. You decide to invest £15,000 (half your saved pot for investing) because you REALLY believe this will be the next big thing.

      This is a rookie mistake, but a common one that is so easy to make. We don’t want that to happen to you!

      How to avoid this mistake:

      This is probably the hardest mistake to avoid but it’s important to be disciplined with your capital. Take your time before writing your first check. Join a few due diligence calls to get a feel for some of the key questions that more experienced angels ask before making a decision to invest. Speak to a variety of founders to get a feel for the types of different founders that exist. Speak to a variety of angels to understand their perspectives and learn from how they think and make decisions.

      As you get more experience you will naturally become more disciplined with your money so do not rush your angel investing journey. We also recommend, do not set yourself targets when you want to invest. You will know when the time is right. Most importantly don’t force it and don’t let FOMO (fear of missing out) dictate your investment strategy. This rarely ends well for investors. 

      You will miss out on great deals, but don’t forget every year is filled with new opportunities to invest.

      2) You invest money that you don’t have

      Another golden rule we remind our community members at AIS is never to invest money they don’t have. What we mean by that is that don’t invest your life savings into a startup that you think is going to give you a 100x return and a few months later that startup goes bust. Thinking back to the statistics on how likely a start-up is to succeed (1 in 10), as an angel investor, you should never invest money that you don’t have. Even if the startup you invested in is successful, remember that your investment is going to be tied up for years and you are unlikely to see your money in the near future.

      How to avoid this mistake:

      Make sure that all your bills, necessary expenses such as your mortgage or rent, bills and living costs are paid for before spending any surplus money on your angel investments. Only invest from your disposable income. For example, you saved some money to buy a nice expensive jacket? Instead of buying this jacket, consider using this money to invest in these amazing founders that you have just met. They have determination, strong product-market fit and operate in a growing market (always do your due diligence!). That sounds like a great trade-off! The key to remember is, NEVER invest money that you cannot afford to lose. We want angel investing to be a source of joy for you and not stress.

      3) You have no money to follow on your successful investments

      There are a number of strategies that you can implement as an angel investor when it comes to structuring your investment portfolio. There is the “spray and pray” strategy for example, where you invest capital in as many startups as possible and hope that a few will succeed. However, a more common strategy that is seen amongst angel investors is diversification and saving some money as a follow-on to avoid being diluted down the line by larger investors such as Venture Capitalists and Private Equity houses. This is because follow-on investment is necessary to avoid having your shares diluted and long-term returns eroded. This is why avoiding mistake #1 is key because if you spend all your money at the beginning of your angel investing journey, you have no money as a follow-on to your successful investments. 

      How to avoid this mistake:

      Avoid spending all your angel investing money at once. Make sure you keep some money aside to invest in your successful startups when they are raising again. Having follow-on capital is important because it allows you to maintain your equity stake, not get diluted and hopefully eventually make some healthy returns. As a rule of thumb, use the 50/50 rule. 50% of your angel investing pot will go to initial angel investments and 50% will go to your follow-on investments.

      Jason Calacanis was able to turn $100,000 into $100 million through angel investing. If he did it, why can’t you right? wrong.

      Remember, angel investing is a risky business, so even if you avoid the 3 most common mistakes we listed above, it doesn’t guarantee you will make a return. This is why we put so much emphasis on having the right motivations upfront in order to manage your expectations. Making a return is your best case scenario, but please don’t forget what the worst case could be. Get comfortable with taking the risk and investing if the worst case scenario plays out. Just make sure that the worst case doesn’t involve you allocating too much capital, investing what you can’t afford to lose or not saving enough capital to follow on with your winners.

      I hope this article helped you to rethink your capital allocation strategy and you have learnt a thing or 2! Interested in learning more about effective capital allocation for angel investors? 

      Check out our community, programs and membership here. Most importantly if you join our community, you will never be alone on your angel investing journey.

      Ready to level up your angel investing game? Join 1000+ angels in our newsletter.

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        E-book: Analysing Startups the Marc Andreessen Way - The Onion Theory of Risk

        Learn these 11 key risk frameworks from a legendary VC

        Marc Andreessen has grown Andreessen Horowitz (a16z) from a $300 million fund to over $25 billion in just 10 years.

        ✅ Enhance your due diligence questions and decision-making when speaking to founders.

        ✅ Understand the key risks faced by founders and how you can help to reduce them.

        ✅ Ask founders better questions before making an investment.

          E-book: Analysing Startups the Marc Andreessen Way - The Onion Theory of Risk

          What is angel investing

          Angel Investing 101: What is angel investing?

          Angel Investing 101: New to the world of angel investing? Start here

          What is angel investing

          There is a wide range of assets you could invest in today, a few include:

          • Cryptocurrencies like Bitcoin
          • Stocks and shares in publicly listed companies like Apple
          • Real estate like a house you purchase to rent on Airbnb
          • Classic cars like a vintage Aston Martin
          • Prestige watches that hold their value such as a Rolex
          • Art masterpieces such as a Bansky painting
          • and the list goes on…….

          With any investment you make, there is a risk you could lose your money or potentially you could make a return on the money you have invested.

          Let’s walk through a simple example:

          If you invest £1,000 and after a period of time you receive a 2x return, that means you would receive £2,000 as a return i.e. you have doubled your investment. In this scenario, you made back your initial investment of £1,000 with a profit of £1,000 on top. Not bad! This is of course a simplified example not including things such as transaction fees but this is the basics of what it means to make a return on your investment.

          An angel investor sometimes referred to as a business angel is an individual that invests in privately owned small businesses (startups). The investors can choose to leverage their experience, expertise and network to add value and support the company through growth. They receive equity in exchange for this investment with the hope to share in the returns if the company experiences a liquidation event such as an IPO (initial public offering on the stock exchange) or acquisition from another company (trade sale).

          Many initially disqualify themselves from investing in startups because they believe they can’t afford to. With the advancements of modern technology, you could invest a few hundred pounds in startups on Equity Crowdfunding platforms such as Seedrs, Republic and Crowdcube. Check out how VC investor, Henrik from Playfair Capital got started initially through investing on Equity Crowdfunding platforms.

          Contrary to popular belief angel investors can invest as little as a few hundred pounds in startups to be considered an angel investor. Another key characteristic is that angel investors invest their own money compared to for example Venture Capitalists and Private Equity houses who manage and invest money they raised from their Limited Partners

          Angel investors usually invest their own money into a start-up in exchange for an ownership stake in the company, also called equity. Equity is defined in simple terms is defined as ownership of a company. If you get 20% of equity that means you own 20% of a company. This is the most common type of monetary exchange between founders and angel investors. There are different types of funding structures that investors can offer to founders, however, such as convertible notes (promise for future equity at the next priced funding round).

          In addition to providing a new business with capital, angel investors also support founders with other resources such as access to important contacts, mentoring and advice which can be valuable resources for startups. When first-time founders set off on their start-up journey, they often need support with critical business decisions. This is where angel investors can provide significant strategic value. For example, a founder is looking to hire a software engineer and as an angel investor, you can support your founder in this process by helping them during the recruitment process or referring a great engineer from your network. As mentioned, there are many different types of support angel investors can provide. This is also called the added value of an angel investor.

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            Press Release: Angel Investing School’s Andy Ayim MBE, named on Real Deals Future 40 Diversity and Inclusion Leaders list

            Press Release: Angel Investing School creator Andy Ayim, has won a spot on Real Deals’ Future 40 Diversity and Inclusion Leaders list.

            “We are delighted to announce that Ayim made this year’s list for being wholly dedicated to improving diversity and inclusion in the investment industry.  Unsettled by the inequalities that exist around funding that is given to black, female entrepreneurs, Ayim made it his mission to “democratise access to knowledge, networks and capital for diverse founders and investors”. Today, he runs The Angel Investing School that trains professionals from all backgrounds on investing in the next generation of diverse founders. Prior to this, Ayim was managing director of Backstage Capital, where the firm invested in 25 underrepresented founders. In 2017, Ayim published an open letter to leaders trying to improve diversity, with actionable steps for the industry. He started to consider privilege and oppression in 2015 when he was working in Silicon Valley and blogging about relatable role models he identified with such as entrepreneur Tristan Walker of Walker & Co and Nas from Queensbridge Venture Partners. Today, his writing activity has grown exponentially with his weekly newsletter covering minorities in tech (now at issue 222!) he’s become a fulcrum for this cause.  It is this continued dedication that won him an MBE for his contribution to D&I in tech this year.”

            The Real Deals Future 40 Diversity and Inclusion Leaders list, in association with Private Equity Recruitment (PER), showcases key individuals in the asset class who have made or are making a notable impact on improving diversity and inclusion practices across their firm and the wider industry. 

            In light of recent events across the globe and continued efforts to make the industry a more diverse and socially conscious industry, it’s certainly a very apt time to shine a light on this extremely important topic. This years’ list not only highlights key dealmakers, but also those working behind the scenes at private equity and venture capital firms to make a true difference to how we engage with gender, race, ethnicity, sexuality and disabilities and wider D&I policies.

            Real Deals editor Talya Misiri said: “Private equity invests in all types of businesses across many different countries and societies, and yet, the people who invest, mainly share a similar race, sex or socio-economic background. Luckily, there is an increasing minority that are actively trying to change this. 

            “In this years’ list, we celebrate those who are breaking down these pre-existing barriers. Those who are opening the doors of the asset class to all, to make it an industry where people from all walks of life are accepted, welcomed and have the opportunity to succeed.”

            For more information visit: https://realdeals.eu.com/article/future-40-diversity-and-inclusion-leaders

            OneTech Scholarships for The Angel Investing School

            OneTech Partners With The Angel Investing School To Provide Scholarships To Underrepresented Professionals

            The Angel Investing School (AIS) is a nationwide community focused on widening participation for professionals from all backgrounds to learn how to get started with investing in startups. Through their 6 week courses, they teach 30 emerging investors every April and September on a guided tour of angel investing. Their most recent cohort had 45% women and 65% people of colour with a wide range of professions represented by digital marketers to developers and management consultants.

            OneTech is proud to work with a value-aligned partner dedicated to creating a more diverse and inclusive tech ecosystem in the UK. We are proud to have worked with the founder, Andy Ayim who was an Entrepreneur-in-Residence with us last year where he had his Ah-ha moment and went from idea to launching this mission-led business. 

            After piloting a program in April, the two organisations joined together to launch a new AIS scholarship program that sets out to help level the playing field for underrepresented professionals keen to get started with investing in startups but lack the access to the knowledge and network.

            So much of the focus in the work we do at One Tech is about nurturing diverse founders in the London ecosystem but we recognise that in the absence of friends and family round, many of our founders benefit from raising angel investment. Therefore, we believe that as AIS trains more diverse investors, the flywheel will lead to more diverse startups being invested in. This is all part of our long term goal of changing the face of startups. 

            Julie Fedele graduated from AIS earlier this year and went on to invest in Ohne, the UK based direct-to-consumer subscription service providing bespoke deliveries of organic period products to customers, on a cycle to match theirs. In her own words, Julie mentions that,

            “For a long time, I have wanted to start angel investing but didn’t have the confidence. Through AIS, I now have a sound understanding of the process, ‘investing’ language demystified and a laser focussed investment thesis.”

            One Tech is excited to provide 5 scholarship places for the September cohort of The Angel Investing School. Our goal is to provide an opportunity to overlooked professionals who wouldn’t traditionally have access to the startup and investing ecosystem. Andy, the creator of AIS shared, “I am excited about this opportunity to create pathways for anyone from teachers to nurses to have the opportunity to gain access to this education and network.”

            Alison, the Managing Director of One Tech shared that, “One Tech will cover the costs for 5 people to gain access to this opportunity who need it most, we have no doubt it will be a great learning experience and we are proud to partner with Andy on this journey.”

            If you would like to qualify for a One Tech scholarship for AIS: APPLY HERE.

            Applications will be reviewed at the deadline date of 14th July 2020, and recipients will be announced on Monday 20th July 2020.

            To learn more about The Angel Investing School, visit angelinvestingschool.com, and to explore the offerings of One Tech, visit weareonetech.com.


            Angel Investing School FAQs

            What is Angel Investing?

            An angel investor is an individual that finances (invests) in privately owned small businesses. They leverage their experience, expertise and network to add value and support the company through growth. They receive equity in exchange for this with the hope to share in the returns if the company experiences a liquidation event such as an IPO or acquisition.

            Who is this course designed for?

            The curriculum is designed for individuals who have not invested in private companies (startups) or have invested in just a handful (incl. equity crowdfunding) and want to learn how to become a more effective angel investor through learning from other more experienced angel investors.

            It is ok for you to have no prior knowledge of finance and investing as we cover the basics, share content in advance of the course and hold your hand through the experience answering your questions along the way.

            Whilst many founders could be interested to gain insight and empathy into angel investing, it is only suitable for founders interested in getting started with angel investing. We will not be eroding the quality of the learning experience with cross-selling e.g. from accountants and lawyers attending the class with the goal of selling services to participants.

            Professionals from all backgrounds are welcome, from teachers and nurses to plumbers and creatives. We want to widen participation in this opaque asset class to professionals from all backgrounds.

            What topics will the course cover?

            The course will cover 8 key topics:

            • Overview of angel investing
            • Developing a thesis
            • Sourcing & assessing deals
            • Transaction economics
            • Legal process (incl. term sheets and understanding tax relief)
            • Adding value beyond capital (post-deal support)
            • Structuring a deal
            • Building a brand

            What happens after the course?

            You will have lifetime access to the resources and links shared along with the relationships you build. There will be a private community (AIS Alumni) that shares useful information such as demo days, deals within the network, relevant events and more.

            How much does the course cost?

            One-time fee of £495 (incl. VAT)

            How long will this course take to complete?

            The course duration is 8 weeks long, every Wednesday from 6.30pm – 8.00pm, ran virtually, so you can join from the comfort of your home.

            Do I need to be in London to take this course?

            No, we run courses every April and September remotely. So you can join us from the comfort of your home or office.

            For those who can’t commit to attending each and every Wednesday, we have created an On-Demand course that you can take at your own pace.

            Can my company get in-house training?

            We offer a 4 week of tailored corporate training experience. Please email team@angelinvestingschool.com to learn more.

            We also offer for corporates to sponsor the April and September cohorts to widen accessibility for diverse professionals.

            How do I get a return on my investment?

            It is important to understand that investing in privately held companies is an extremely risky asset class. Riskier than investing in buy-to-let properties, mutual funds, index funds and other asset classes. The truth is, most new businesses fail and therefore there is a high probability you may not make a return on your investment.

            Andy Ayim MBE treated his initial investments as skin in the game to gain practical learning experience rather than risk money he couldn’t afford to lose (which is not advisable). He is comfortable at a minimum learning about new technology, business building and new markets through his investments. Focusing on nurturing long term relationships regardless of the outcome.

            What are the course founders & facilitator investment backgrounds?

            The course was curated by Andy Ayim, MBE who has invested in over a dozen startups and has worked for over a decade in the London startup ecosystem, firstly as a founder, before developing his craft as a product manager and more recently as an investor.

            The facilitators are a diverse range of angel investors who each have experience investing in privately held companies. Most of what they will teach will be through personal stories and lessons learned with tools and templates shared throughout the experience.

            Why did you create the course?

            I personally wanted to learn how to get started with angel investing and learn from the experience and lessons learned by others. I want to democratise access to knowledge so that people from all backgrounds can learn whether or not angel investing is right for them.

            Are there any regulatory requirements for being an angel investor?

            The guidance from a regulatory perspective, under the FCA rules Financial Promotion Order and Markets Act states that you can be an angel investor and make investments in a small business through your own decision if you can self-certify as either High Net Worth or Sophisticated investor.

            Simply put, you need to understand the high risk associated with investing in small businesses and therefore be able to invest an affordable sum of money.  Don’t invest what you can’t afford to lose. Once you invest your money could be tied up for a number of years and still result in a loss. Ensure that this money is not part of your lifestyle costs or money tied up with your monthly costs, it should be a sum of money you can afford to invest.

            I know it sounds pessimistic, but it is important to level set before even taking the course. This isn’t a get rich quick scheme or promise of any riches. There is a possibility that you could make a return on your money and potentially access some tax reliefs, which will be covered in the course.

            Is there a minimum amount of money one should have when starting out in angel investing?

            Personal finance is what it says, ‘personal.’ So given how risky this asset class is, you don’t want to expose more than 5% of your annual income to angel investing. For an illustrative example, If I earn £100,000 per year. I wouldn’t risk more than £5,000 on angel investing per year. On the course, we teach how you can invest as little as £1,000 alongside other angel investors.

            Disclaimer: this is not to be deemed as financial advice, please seek advice independently from a registered financial advisor.

            Why do you aim for 50% of the course to be women, men of colour, LGBT and/or non-binary?

            We believe the ‘opportunity cheque’ or the first money invested into a small business can be pivotal to the outcome of whether that business can grow to succeed or fail. Therefore with less than 1p in every pound going to all-female teams and the lack of funding going to diverse-led startups we believe if we can train up more diverse angel investors, more diverse startups will gain investment as a result.

            The Angel Investing School Manifesto

            The Angel Investing School Manifesto

            Yesterday, a friend of mine shared with me the great news that he was planning on starting a family and asked: “what is the one skill that you would love to teach your daughter as she grows up?” Almost immediately I answered, “the ability to make smart decisions on a consistent basis when I am not in the room.”

            One trait that I believe has shaped me profoundly in the decisions I make in my career, with my family and in life, is the ability to make decisions guided by a set of principles. I call these my guiding principles; essentially they are a shortlist of mental models that tie into my beliefs. You could say that they are helpful one-liners that help me make better decisions.

            In starting The Angel Investing School, I had the opportunity to catch up with a range of people who I knew were successful angel investors (people who invest into new businesses) and it was apparent that there were common themes, within the lessons learned from each of their experiences; that became the guiding principles that helped them avoid making mistakes.

            I recognise that investing in new businesses (startups) has become democratised, with platforms such as Crowdcube and Seedrs that allow individuals to invest as little as £20 into startups. However, the problem exists when the access to invest is so easy that many who take the leap have not had the education to understand what they are investing in. People are taking a gamble as they don’t understand the risk associated with their investment and what returns could look like in the eventuality that the company is acquired (bought by a bigger company) or has an IPO (Initial public offering is when a company gets listed on a stock exchange like FTSE 350 in the UK).

            I also recognise that there is a new breed of potential investors, who are digitally savvy, some are young and rich such as content creators (think vloggers and musicians). Others include professionals who have worked several years in their career, building domain expertise and a broad network but have no clue where to get started with investing in startups. Whilst the remainder are entrepreneurs who have successfully grown their companies and are at a stage where they want to invest back into new emerging startups, leveraging their experience and expertise to support others like they were supported too.

            The guiding principles below are my own personal principles and I don’t share them as an oath or a contract but as insight into what helps me make better decisions when investing in startups.

            1. Angel investing shouldn’t be the first investment you make
            2. Play the long game and embrace the downside
            3. Take your time, and do your due diligence
            4. Get to grips with tax reliefs
            5. This is a team sport
            6. Don’t transact, nurture winning relationships
            7. Invest in what you understand
            8. Add value beyond the capital


            1. Angel investing shouldn’t be the first investment you make

            Most high net worth individuals and sophisticated investors allocate less than 5% of their wealth to angel investing as it is such a risky asset class. Typically, wealth has been built up from a range of other asset classes from investing in land & property to public stocks & shares. They are investing what they can afford to lose with angel investing similar to the money they could afford to lose at the casino. As tempting as it may be, learn the rules of engagement, play the long game and be disciplined and patient. Avoid making a bad investment you cannot afford, which puts you off investing ever again.

            2. Play the long game and embrace the downside

            Don’t invest too much too soon given that over 90% of your investments will probably fail. A common situation is where you have saved up £50K (which is a significant amount of money) and you blow it all within two months out of excitement and the thrill of investing. You soon realised you placed a lot of bad bets, and you have no money to double down and follow on with into the good performers. The wise investor sets boundaries such as investing up to 1/3 and saving 2/3rds for follow on investments into companies that go on to perform well. Go in with your heart AND your head and invest in a few companies a year for a long duration of time like you would if you were a value investor in Index Funds. Embrace the downside and remember it is a continuous learning journey.

            3. Take your time, and do your due diligence

            Some new angels feel uneasy and guilty taking founders time and rush to make hasty decisions to invest. Remember, it is a significant amount of money, spend time getting to know the founding team, the product, the customers and the market. Bounce the opportunity off a trusted set of advisors to make an informed decision. They might raise the red flags you failed to see.

            4. Get to grips with tax reliefs

            This is UK specific, but SEIS/ EIS (Seed Enterprise Investment Scheme/ Enterprise Investment Scheme) enables investors to reduce risk and do more with the money you have. Both schemes are designed to encourage investment into early-stage growth-focused companies, providing tax relief (some money back!).

            5. This is a team sport

            Startups often raise anything from £50K to £300K in their first funding round. Therefore angel investors often invest alongside other angels to close the round. Joining networks and spending time with founders to foster relationships gives you access to deal flow and enables you to share deals with others and get advice from them too. It can be a lonely journey so value the communities you could join. Get help from others who have already been on the path you are about to go on. All of these lessons are from angel investors I have learned from.

            6. Don’t transact, nurture winning relationships

            Don’t be blinded by a big market or exciting idea, the highest risk is the founding team’s ability to execute on their idea. Remember, you are in it for the long haul and the only thing that is guaranteed when you invest in that you buy the right to participate in an exponential learning journey. There will be some highs but probably a lot more lows, and those are the times you need to support the founders most. Create memos or keep a journal so that you can track why you invested, how you were feeling and lessons learned along the journey.

            7. Invest in what you understand

            Stick to your core competence and invest only in what you understand. For this reason, I don’t invest in crypto and certain aspects of deep tech. A lesson learned from value investors Charlie Munger and Warren Buffet who were comfortable in missing out of big tech companies like Google and Facebook as they focused on what they knew well and ignored opportunities outside of that. If you worked in marketing for 20 years in an FMCG company then a good place to start could be by focusing on marketing tech and/or FMCG startups.

            8. Add value beyond the capital

            A brand is built through founders sharing with others how helpful you have been, especially during the difficult times. Four things really stand out to me here:

            • Empathy to understand what the founding team feels and listen sometimes without a solution, just listen and be present.
            • An ability to fill knowledge gaps.
            • Introductions to customers, partners and fellow investors (if needed).
            • Deliver quality contributions consistently.

            The Angel Investing School is about what you could do with the money you can afford to lose. Adhering to the principles above should help teach you how not to lose it. My hope is that once participants complete the course, they leave equipped to make smarter investment decisions on a consistent basis.

            Are there any principles I missed out on that you have? If so, please share below. If you are interested in The Angel Investing School, follow us on InstagramTwitter and check us out here.

            Can I start angel investing with just £5K?

            Can I start angel investing with just £5K?

            The origins of angel investing is broadly believed to have been an investment by Arthur Rock in 1957 into the Fairchild Semiconductor in Silicon Valley, California . At the time, Arthur was based in New York before moving out to Silicon Valley and eventually went on to form the venture capital firm Davis & Rock. He invested in a range of tech companies we regard as household names such as Intel and Apple. You can learn more about this history and the early days of venture capital from documentaries such as Something Ventured.

            Personally, I grew up fascinated by technology, business and investing. Across my interests, passions and career, I have had the opportunity to explore each of them. In 2019, I wanted to learn more about how to become an effective angel investor and learn from the lessons of more experienced angels. I soon realised that a number of people in my network were keen to learn this too. The challenge was that venture capital is an opaque industry and there was no clear on-ramp into angel investing.

            The Angel Investing School was born out of this frustration. The purpose is to enable curious investors from anywhere to learn how to get started with investing into startups. I believe entrepreneurs can come from anywhere, so why can’t the capital too!

            Common misconceptions people had included:

            • I need at least £20K saved before I can invest
            • I need accreditation before I can invest
            • I will make great returns in a year or two of investing my money
            • I’ve invested £50 in Monzo through crowdfunding, I am an angel investor and can put on Linkedin that I am an investor in Monzo now

            Ok, so that last one was cheeky, but a lot of people invest through crowdfunding unaware of what happens to their money and don’t gain skin in the game to learn what it is like investing as an individual. The FCA states that anyone can start investing as long as you can self-certify as either High Net Worth or Sophisticated investors. This basically means you need to understand the risks associated with investing your money and in the event that a company fails you receive no return. There is no limit on how much or how little you invest.

            So can you invest with as little as £5K into a new business venture? Absolutely, but the decisive factor that enables you to do so is whether you can access to quality deal flow early and whether you can invest in a sustainable way rather than a ‘one-off.’

            Truth is, most new businesses fail and therefore, there is a high probability that you may lose your money as a result. However, the only thing guaranteed is a fast learning experience from having skin in the game. Treat your first investments as the cost associated for learning how to become an effective angel investors. Similar to investments we make into our education from an MBA to an online course, angel investing is an investment into your personal development. Your initial investments represents an opportunity to learn more about developing your investment thesis, learning about how you can add value beyond the capital and what you will and won’t invest in going forward.

            To learn more about the next available course, click here.

            Source: WSJ analysis of investor documents

            As illustrated above, both Mike Walsh and Owen Michels both invested $5K into Uber in the early years as angel investors. I can hear the naysayers say, “but that is the United States, you can’t do that in the UK.” Wrong again my friend, you sure can. In an interview with Sifted, Check Warner, Partner at Ada Ventures explains how Ada Ventures scout network can either get paid in cash or choose to reinvest their finders fee into startups they introduce to the VC.

            The Angel Investing School exists to make investing into startups more accessible to all. We will be running an inaugural in-person school for 6 weeks in London, taking place across 6 evenings from 1st April to the 6th of May. The topics we will cover include:

            • The history of angel investing and the London ecosystem
            • Sourcing & assessing deals
            • Transaction economics
            • Deal Structuring (incl. term sheets and valuations)
            • Adding value beyond capital
            • Developing a thesis

            Once the course ends, all graduates will gain access to ongoing deal flow, events and support in building a track record in the startup ecosystem. Interested? To find out more and sign up, click here.

            Why Am I Building a Micro School?

            Why Am I Building a Micro School?

            A decade ago, I left university and realised I wanted to work within the startup ecosystem. In the last 10 years I have been fortunate to experience working in over 10 different cities across a range of experiences from co-founding a startup to working as a product manager within a range of companies. More recently, I sat on the other side of the table as an investor at Backstage Capital, investing in underrepresented founders across the globe.

            When I left university, I was already in the mindset that life was a continuous learning journey which didn’t just start and stop in school. However, I didn’t realise that my knowledge, relationships and capabilities would compound through the various work I have done.

            Nowadays, I freelance with startups, scale-ups and corporates on product discovery, planning and execution. Alongside that, I create content for founders to provide the advice and steer I wish I had at the start of my journey to reduce or eliminate a lot of the risks associated with the all consuming journey of starting a company.

            Last year, I reached a point of tension given the limited capacity I had between my freelancing clients and preserving family time with my daughter and partner (which I am never willing to compromise). I didn’t (and still don’t) have the bandwidth to catch up with everyone, that “wants a coffee catchup.” I had 30-50 founders contacting me for help every month. Anything from, “how do I validate the problem I wish to solve in a cost-effective way” to “could you review my pitch deck and my product?”

            I can empathise, as I have been in their position before, I speak to founders everyday and I actually care and do want to help. But, I recognise the need to find a more scalable and accessible way to serve founders even if I can’t be in the room.

            I tested out a podcast and Instagram IGTV series last year where I was sharing advice on specific topics with founders, from finding your first set of customers to understanding if venture capital is right for you. The feedback has been overwhelming and an indication that more of the same is helpful and needed. As a result, this inspired me to create AHVC.School. A new micro school for explorers who want trusted advice on the first steps of discovering whether they should pursue an idea.

            AHVC School is the go-to destination for the discovery process and making smarter decisions.

            The focus is on discovering:

            • Why you want to pursue an idea
            • How to validate yourself, your idea and your customer
            • Why you are well placed to do this now
            • How to make smarter decisions on a consistent basis

            This is not a course that will get you from idea to startup in 6 weeks. Most explorers will validate that their idea is not feasible or even that they are not well suited to pursue entrepreneurship right now. We focus exclusively on the first step in your pursuit as we feel there is not enough honest and transparent content or support on this stumbling block so many people fall on.

            My promise is regardless if you validate the need to start a company or not, you will learn at a real fast pace!

            To make it more accessible and affordable, I have decided to create courses, which comprise of 4-6 short classes on a range of topics such as how to create a roadmap or how to interview users. The first two courses will be:

            • Getting started with discovery (online)
            • Angel Investing School (in-person pop-up in London)

            Most of the courses, content and community will be online, with some in-person pop-up schools. All of the courses will be based off demand and feedback from users who sign up.

            If this community sounds like something you would benefit from and you have topics you would love to learn about, then you can join the waitlist here and share what you would like to learn here.