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What kind of mindset do angel investors have? Is there a single “archetype” or collection of traits distinguishing an investor in early-stage companies from other investors?
Below, we offer some reflections from our experience with our angel investor network at Bure Valley Group. We hope these insights help existing investors learn more about themselves and how to lean on their inner strengths.
For potential angels, perhaps these insights will help you decide how your psychology might apply to this exciting investing area as you venture into it.
To learn more about our EIS projects and other early-stage opportunities, visit our portfolio page. For enquiries regarding our latest projects and funding, you can reach us via:
+44 160 334 0827
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#1 Hands-on
Most retail investors are quite “passive” with their investments. For instance, a worker might contribute to a pension where the money is invested into active or passive funds (managed by professional managers). An early-stage investor, however, is much more involved.
An angel investor will offer regular guidance, mentorship and strategic advice to team members of their chosen startup investments. Naturally, this requires a confident investor mindset. You know that you have valuable advice and experience to offer, and people should listen.
#2 Networked
Early-stage investors tend to be quite “social” people. They mingle with other investors, entrepreneurs and influencers, looking for the next opportunity.
This does not mean you need to be an extrovert, but you need to be willing to network – especially in the startup ecosystem.
You need time and motivation to do this. Also, discipline and organisational skills are crucial – e.g. identifying upcoming events featuring industry experts and potential partners, booking and attending to expand your network further.
#3 Growth-oriented
Early-stage investors tend to get a “buzz” out of the “growth phase” of companies. Once a business starts to mature and establishes itself with a lower expansion rate, the itch reappears to find other “high-growth” businesses to get involved with.
However, this stage of the business lifecycle is not for the faint of heart. The risks and potential rewards are higher than those of larger, profitable enterprises. This tends to appeal to investors with a keen sense of adrenaline and a thirst for excitement.
#4 Value-driven
Retail investors are often happy for a professional fund manager to select their investments. An early-stage investor, however, is likely far more “picky”.
If a startup’s mission and values do not match with their own, it will probably be discarded. By contrast, an alignment will often result in a high degree of personal “buy-in” from an angel investor. They will believe strongly in what it is trying to do, going the extra mile to help it succeed.
#5 Resilient
An early-stage company is likely to encounter many issues, including staffing problems, product development challenges, and threats from competitors. An angel investor needs to be aware of these troubled waters and ready for them.
Having a calm, resilient outlook will not only benefit your own peace of mind but it will also encourage and empower founders and startup team members. After all, panic is not helpful for strategic thinking and decision-making.
#6 Sector-focused
It is vital for all investors to diversify their portfolios appropriately. This helps to “buttress” your investments if certain holdings underperform or fail.
Yet early-stage investors also know they have a specific specialisation, perhaps due to a long career in a specific sector (e.g. healthcare or retail). They know the industry intimately, and this helps their due diligence process when considering startups within their “space”.
#7 Collaborative
Nobody can be a specialist or expert in everything. A wise angel investor will recognise this, opening their minds to learn from other investors with their own unique specialisations.
This is where an angel investor network can be very helpful. It provides a “meeting place” for diverse investors to congregate and share their insights, ideas and opportunities. Angels can then partner on projects of mutual benefit where suitable.
#8 Diligent
Angel investing requires putting a lot of money up-front to startups (e.g. tens of thousands of pounds). Therefore, you need a keen eye for detail, leaving no stone unturned in your due diligence process.
These investors are not afraid to ask hard, respectful questions to founders. They recognise that good startup leaders will be prepared for this, receiving constructive criticism in their stride.
#9 Adaptive
As mentioned, things often “go wrong” in the world of startup investing, even with the best due diligence process. Perhaps political or economic events derail the best of plans.
Maybe one of the founders falls seriously ill, or a new competitor swiftly and unexpectedly enters the market.
It will help investors to have a flexible and adaptable mindset in these situations, adjusting strategies and approaches based on market conditions, new risks and emerging opportunities.
Invitation
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
[email protected]
