What are the different types of angel investors?

Really insightful observation about angel groups from Gregory Raiz. Great food for thought. Good startup investors are conviction driven and take counter intuitive bets, using information asymmetry, and relying on the Power Law (aka the 80/20 law, or Pareto Law) to find the elusive deal that wins big. Consensus driven investors are still useful, but will they catch the mythical unicorn? For more on this line of thinking, see Sebastian Mallaby's "The Power Law", a history of VC in America, starting with the early days of Fairchild Semiconductor and investor Arthur Rock in San Francisco ttps://https://lnkd.in/e6yk477G Amazing how these guys discovered the financing model best suited for innovating deep-tech entrepreneurs. Really love these posts Gregory Raiz. Love the hard hitting insights! Gregory Raiz and his partner Jessica Lynch are starting their own VC firm, Raiz Capital (https://raiz.vc/). Prior to this, Greg was the managing director of Techstars Boston. I attended Greg and Jessica's Ditch the Deck event in Cambridge last week - a well attended, well selected group of entrepreneurs. Four pretty good demos of product. The event will be repeated in August. Check out Greg's LinkedIn stream, he's been pretty active with his posts!

One of the most oxymoronic term I have come across is "Founder Friendly Investor", especially as applied to VCs and angel investors. One does no favor to the founder by founder friendly. Investor/Founder relationship by its very nature, is one of being an adversaries at the time of investment. They have to sit across the table and do an arm's length transaction, taking into account not only potential but also risks to come up with a valuation. A soft valuation does not stand the test of time, it sends a wrong signal to the founder and hurts the interests of investor. A high initial valuation sets up a high bar and makes subsequent investments hard to happen. They weaken the eco-system and make it harder to get venture returns on high risk investments. Incidentally, once the investment has been made, both founder and investor sit on the same side of the table to make the company work. Results are in for the heydays of founder-friendly VCs. They are not pretty. Investing in risky startups is a serious and hard business and it must produce superior returns to safer investments. Incidentally, most VCs do not produce any returns at all. Being a founder friendly VC is just being dumb.

At the time of investment in a startup, it’s a zero sum game between the founders and the VCs. Eg if a investor takes a big liquid preference, the impact will be directly on the investor incase that scenario happens. Very nicely articulated by Kanwal Rekhi. #startups #founders

Angel Investing is just as interesting as the name sounds. Think of it as an angel supporting the growth of innovative startups and early-stage businesses. Angel investing involves providing capital to startups and early-stage businesses, often in exchange for an ownership stake in the company or business. Angel investors are typically individuals with disposable income who are interested in supporting innovation or any other value possessed by the business they are funding that aligns with their own values. Asides the provision of financial backing, angel investors often offer valuable industry knowledge, mentorship, and connections to help startups succeed. How do you become an Angel Investor? Here are five simple steps you can get started with: 1. Learn the basics: Before diving into being an angel, it's important to familiarize yourself with the ins and outs of angel investing. Attend webinars, read articles, and join online communities to learn from experienced investors and stay updated on industry trends. This knowledge will help you make informed decisions and avoid common pitfalls. 2. Familiarize yourself with the risk: Investing in startups carries a higher level of risk than other investment types. Startups are often unproven, and may or may not succeed. It's important to understand these risks and be comfortable with the potential for loss. By knowing the risks, you can take steps to mitigate them, such as diversifying your investments and evaluating the potetial of the business you are funding. 3. Set your investment criteria/strategy: Establishing a clear investment strategy will help guide your decisions as an angel investor. Determine your focus areas, such as specific industries or technologies, and decide your risk tolerance and the amount you are willing to invest. Having a well-defined strategy will help you stay on track and make choices aligned with your goals. 4. Perform Due Diligence: Thoroughly research and assess each investment opportunity. Evaluate the startup's business model, team, market potential, and financial projections. Performing due diligence helps you identify the most promising opportunities and understand the risks involved. 5. Join a community of Angel Investors: Connecting with other angel investors can be a valuable resource. Joining a community allows you to share experiences, insights, and opportunities with others. Networking with like-minded investors can help you navigate the world of angel investing and find potential co-investment opportunities. Getting started as an angel investor might not be the easiest thing, but with the right information and a community of well-informed investors like yourself, you can get started on the right track. We have exciting angel investing opportunities coming up at Halvest. Join our community of ethical investors at www.halvestco.com to stay updated! #angelinvesting #startupinvesting #ethicalinvesting #investwithhalvest #halalinvestments

Great advice on seeking Angel Investment funding…

While spray and pray may work for VCs, it is likely a very bad approach for angel investing. In my relatively short period of being active in very early stage investing, and interacting with angel investors, I have realized a common trend. Most “non-celebrity” angel investors basically are folks who meet the net worth criteria and have a lot of money to deploy in this highest-risk asset. Their goal is to “diversify” their corpus enough to hit those rare winners that bring the power law into play and they make the 50-100x or higher returns in a couple of their companies to justify the rest of the busted list in their portfolio. In that endeavor, they end up “chasing” trends and trying to find the next winner in what might already be a saturated or soon-to-be forgotten space. Here is why and how angel investing (IMHO) needs to be looked at differently: - VCs are considered trend-predictors vs public side investors who usually follow trends and company fundamentals. Now think of angel investors as a pre-cursor to even VCs. As an angel investor you need to think of what will be hot 5-10 yrs from now, and that is a very hard job. - Angel investing is NOT a passive affair. If you hope to put in your money in 20 startups and forget about it, chances are you will never hear about that money again. Align your investments with your expertise, so you can add value to the companies and the founders and amplify their chances of success. - An understanding and eye on financials is great but an obsession for P&L and numbers is likely not your best bet at this early stage. Angel investments (in its true form) are a bet on one or more of the following: founders, a rising thematic, execution capabilities, large / untapped TAM, unsolved real problems, potential scalability. If numbers could tell the whole story, the startup would line up deep-pocketed VCs and not look for angels. The maximum “lost capital” probably comes at the angel stage, yet it isn’t spoken about because the ones that lose it can afford to lose it. There is of course a LOT of luck involved too - but are you controlling the controllables enough to tilt the edge in your favor?

Maintaining a balanced relationship between #investors and #founders is crucial. #CheckOut this weeks latest post from #WBS's own John Romano. https://lnkd.in/eZn7vCF9 #entrepreneurs #WealthBuilding #financialliteracy

Why Are Angel Groups Terrible Investors? Before my peer angel investors get the pitchforks out, let me explain… I’ve been a member of several angel groups and maintain my membership with a few today. The members of these groups are exceptional people, and anyone who is helping founders by giving their time or money is admirable. Their efforts are appreciated, but these groups highlight some issues in early-stage investing that need to be discussed. 1. Successful Investors Are Non-Consensus To be a great investor, you need to see things that others don’t see. You have to understand the inefficiencies in the market and invest in founders that other people don’t believe will succeed. This non-consensus approach gives the investor a financial advantage. Angel groups are, by definition, consensus-driven. Unlike a venture fund where you have highly concentrated decision-making, angel groups often require larger group consensus. Because of this, non-consensus founders are less likely to be funded by these groups. This adverse selection normalizes toward good investments but makes it less likely to fund great investments. 2. Decision-Making by Committee Angel groups often make decisions through a committee process. While this can bring diverse perspectives and reduce individual biases, it can also lead to groupthink. Bold and innovative ideas can be diluted in favor of safer, more conventional wisdom. This investment process can be slow and risk-averse, which is detrimental in the fast-paced world of startups where speed is crucial. 3. Deal Sourcing Great deals and exceptional founders are rare. In many cases, the best deals never make it to angel groups. Top-tier founders seek out investors who can provide more than just capital; they look for strategic support, mentorship, and connections. Venture capital firms or individual investors with a strong track record and industry expertise are typically more attractive to these founders. Consequently, angel groups end up with a pool of opportunities that aren’t necessarily the cream of the crop. This limits their potential for high returns compared to more specialized investors. 4. Diligence I’ve seen startups go through the angel group process, prepping, pitching, and getting reviewed, only to have no one in the group volunteer to do due diligence. When no one has strong conviction, the deal dies. This is also true when no one is willing to write the deal memo or stick their neck out for a founder or company. Advice for Angels - Joining groups is great but have conviction outside of these groups. - Don’t bring a deal to a group unless you’re personally already committed. - Add value and be an expert. Find an area where you can attract the best founders and add value in addition to money. - Keep helping founders, they really appreciate it.

Chatting with a founder today raising £250K generated some interesting points about. I thought it might be useful to share some takeaways: ⚡ Angels aren’t VCs – and they’re not all the same Unlike institutional investors, angels can vary a lot in terms of their activity, experience, and value. These days, lots of people have “angel investor” on their LinkedIn or Twitter bios, but not all of them are genuine or worth your time. As a founder, your time is precious, so do your homework—platforms like Beauhurst, Crunchbase, or the UKBAA members directory can help you figure out if someone’s really active or just dabbling. Check their portfolio to see if they’re serious. 👉 Location matters for angels It’s easy to overlook, but where an angel is based can make a difference. If your goal is to connect with top-tier venture funds, having angels who are well-connected and "on the circuit" in London (or your home city) can boost your chances of getting the right introductions. An angel from a smaller, less-connected network may not bring the same leverage. 🎯 Match your angel to your market Many angels are sector-specific, and while some might be open to anything exciting, targeting those who know your market will give you the best chance of not just investment but value-adding expertise. 🚀 Build trust early Trust is a critical factor for angel investors, and they’ll be asking themselves key questions like: ➡️ Does their background highlight their resilience and problem-solving ability to navigate future challenges? ➡️Does this founder deeply understand their market and business model? ➡️Have they demonstrated strong execution skills and a clear plan to scale? ➡️Are their financial projections realistic, and do they show a clear path to ROI? ➡️Is there evidence of traction or market validation ? To build trust, focus on the details that matter: be prepared, show mastery of your numbers, and provide evidence of market fit. Be transparent about risks and challenges, but pair this with a credible plan for how you’ll address them. Build multiple trust points by following through on commitments, proactively offering references or testimonials, and being open to constructive feedback. Investors are more likely to back founders who demonstrate professionalism, competence, and integrity from the outset. ⏩ Leverage networks Angels often invest with other angels or alongside funds, so finding clusters of well-connected people is key. Your goal should be to identify the lead domino—the first investor who can bring others in. A round tends to gain momentum faster when the angels already know and trust each other. ⚠️ Not all money is equal Sometimes a smaller ticket from an experienced, well-connected angel can bring you far more value than a big cheque from someone inexperienced or hands-off. Hope this sparks some ideas! If you want to chat more about any of these points, just let me know. #angelinvesting #startups #funding #founders #newableadvice

The Follow-On Dilemma ⚖️ One of the trickiest aspects I’ve recently come to appreciate in venture capital is deciding on follow-on investments. At first look, it seems straightforward, but these choices really shape both the startup's trajectory and the fund's long-term success. 💰 The Reserves Challenge & The Pro-Rata Fence 🚧 Allocating capital for follow-ons is no small task. Ideally, funds would know from day one which companies will skyrocket, but the reality is much more complex. VCs must make early calls on how much to reserve upon the creation of the fund, balancing flexibility with potential returns. Then comes the “pro-rata” dilemma: funds often have the right to maintain their ownership in later rounds, but this right comes with trade-offs: - Exercising pro-rata can drain capital that could support the portfolio winners. - It might lead to over-investing in companies with uncertain futures. - It limits diversification across more startups. And here’s where it gets more complicated: choosing pro-rata can feel like sitting on the fence. If the fund is truly confident, why not double down and increase the stake? On the flip side, opting out can send an unintended message to the startup and future investors, signaling a lack of confidence. In a market that often follows a herd mentality, choosing not to follow-on will make it harder for the startup to raise, risking the initial investment altogether. 🎯 The Balancing Act Ultimately, follow-on decisions require balancing several things: - Supporting founders while optimizing fund returns - Reserving enough capital for potential fund returners - Maintaining a reputation founders and future investments can trust Fund size, market conditions, and strategy all play a role in how VCs approach these decisions. Some funds prioritize always participating in follow-ons, while others focus on one investment round and then diversify into new startups. Navigating follow-ons is far from straightforward. It’s all about balancing founder support and positioning the fund for long-term success. What do you think? Should VCs prioritize backing founders in follow-ons to give them more time to figure things out, or should they focus reserves on the next potential winners?