Bure Valley Group is an investment introducer platform which links successful investors with exciting, innovative UK startups seeking funding. This content is for information purposes only and should not be taken as financial or investment advice.
So far, 2022 has posed numerous challenges to investors as stock markets have declined and inflation has eroded real returns. Yet many angels have found shrewd ways through to access compelling growth via promising early-stage businesses. In this article, we offer four lessons to learn from successful angels over the last 12 months to help inspire your own thinking. Many ideas you find below come from our network of angel investors here at Bure Valley Group.
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#1 Don’t neglect the value of a network
Taking time to build a network with VCs, angel investors and business founders across the world is one of the best ways to invest your time and open up future opportunities. For those angel investors looking to get started, this is especially important as it will help you to access more pre-vetted startup projects than you can likely manage on your own. Here at Bure Valley Group, we offer an exclusive network of our own that you can consider.
#2 Seek investor-product fit, but be flexible
It is a common mantra in investor circles that you should only invest in early-stage businesses that you understand to a strong level. Whilst there is much wisdom in this general rule, you can include other verticals and niches in your portfolio without needing to be an expert in each field. If you can find a startup with a large market, a positive customer acquisition experience and a stong level of retention, then it could be an opportunity worthy of your consideration.
Bear in mind that much of your own industry experience in a particular field can go out of date very quickly. You need to continually refresh your knowledge by looking at a wide range of business models and markets. Certain industries that used to be awful for investors may no longer be that way, and vice versa. Also, including a wide range of startups and veriticals in a portfolio is a great way to help mitigate diversification risk.
#3 Always check the founder(s) and business model
Many factors determine the success or failure of a startup. However, arguably the people at the help will primarily drive the outcome. This is not simply about looking out for bright founders. It means identifying traits such as practical-mindedness (willing to try something rather than just thinking about it), ability to raise money, fast learning, rapid problem-solving, able to inspire and motivate a skilled team, good communication and energy.
Product-market fit, alone, is not a sign of a robust business model (although this is fantastic if you can find it). Of course, the startup needs a good market. Later, it might need to be able to pivot into a new/developed market to continue growing. Building a business around a “great product” is often, on its own, a sign of vulnerability. What if the market is not as excited about the product as the founders are? However, offering a great market a minimum viable product can lead to rapid success, all of a sudden.
#4 Hold a sub-20% stake, and know when to call it a day
One of the advantages of investing with others (e.g. as a syndicate) is that you can draw upon the knowledge and experience of other highly-skilled angel investors. They may be able to see things you can’t, giving you all a better chance of helping drive the business towards growth. It also gives you more flexibility later. If you decide not to follow the syndicate into the next round of funding, then the startup is not placed in peril (provided the others stay invested, of course!).
Knowing when to pull out of a startup investment is not an easy skill. Perhaps the market is no longer viable or the founders have not turned out as you expected. It could simply be that you have lost interest in the startup and its wider industry. Ultimately, your portfolio matters more than keeping other people (directors, fellow investors etc.) happy. You cannot keep throwing good money at a bad idea. Take time to look hard at the financials and run a thorough analysis to make sure you have peace of mind about your decision.
It is an exciting time to be an angel investor and there are many important skills involved with building (and maintaining) a strong portfolio. Having a checklist ready at hand will beneficial to many investors as they approach different early-stage opportunities. Hopefully, these insights from our network will help you as you decide how to refine your choice of hopeful startups in the summer months ahead.
Interested in finding out more about the exciting startup projects we have on offer to investors here at Bure Valley Group? Get in touch today to start a conversation with our team and discuss some of the great investment memorandums we have available here:
+44 160 334 0827