Learning & Resources


24-03-2021 - - 0 comments
Only connect – lessons from Covid times

The word on the street is that the angel market is quiet.  Perhaps this is not surprising given the financial and practical strains on the average (is there such a thing?) angel in the last year. 

Fortunately, most angels sorted out their extant investments by the summer and a surprising number, I hear, have thrived in the pandemic rather than suffering too badly.  This is great news.  We may get sick of Zoom and Teams calls, but business has rapidly got used to the idea of using this workaround to get things done.  And entrepreneurs and angels both are two of the most adaptable and innovative groups of people in the world, so I don’t worry too much about this part of angel investment activity.

The elephant in the room is making new investments in unfamiliar businesses.  Again, I hear quite often that entrepreneurs who already have the support of one angel, can raise funding from a syndicate known to that angel. And if one syndicate supports a deal, then others are frequently willing to co-invest. 

However, we know that angels place great emphasis on backing the jockey not the horse, so what is to be done about the entrepreneurs who are not well connected to angels?  Indeed, is there potentially a pool of people that we are missing out on seeing; the pool of people who are most driven because they come from circumstances where they really MUST succeed because of their intrinsic disadvantages?

There are lessons to be found in the equity crowdfunding market processes, although there are others that will be needed to create the connections between entrepreneurs and angels – accelerators, incubators and professional advisers - who can get to know and therefore vouch for the fundraising entrepreneur.  It’s great to hear of so many networks and others holding Zoom presentation events which mean angels do not have to travel to meet entrepreneurs, but they will only become sustainable if the promoters of the deals can provide the angels with sufficient comfort that they really do know the entrepreneur and the business well.  This means networks will have to do more preparation work to get the entrepreneurs investment ready and who will pay for that?

Equity crowdfunding does give us many clues.  Pre-recorded videos by entrepreneurs don’t just have to be a 2-minute advert.  Video can be used to help entrepreneurs pre-record answers to angels’ questions.  Chat and Q&A functionality enables angels and entrepreneurs to interact remotely.  And, of course, for the angels willing to venture out you are permitted to hold essential face to face business meetings.  What better reason for a meeting (suitably socially distanced and maybe outside) than to discuss with an entrepreneur about backing them?  As angels you may not feel this is essential, but I am certain the entrepreneur will!

Another big challenge is maintaining and building on extant angel-to-angel relationships.  Many of us really appreciate the opportunity to attend pitch events and more.  Zoom is not quite the same.  I admire the networks and groups who have responded by holding social and other events on Zoom to keep members in touch with one another. Creating opportunities for angels to talk to one another about deals is helpful, (even if the network manager stays as the silent organiser to avoid the FCA risks of participating in discussions about investments).

Connecting with new angels is going to be a challenge.  Economic shocks always make most angels pause and slows the new angel pipeline.  This will be further exacerbated by the fact that investors are likely to get great returns from the UK listed markets in 2021 (or that is what all the stock market analysts I know are saying!).  So, there will not be quite the compelling requirement to seek out return from the private markets for many people.

Now more than ever we need to make the case for what angels can do to help with the recovery.  This will not simply be about the cash angels invest, but (and helpfully not regulated activity) in terms of the value they can add based on their experience and the time they have available.   We need a concentrated national effort to capture and communicate this value; ranging from what best practice looks like through to how to train angels to be superb investors. 

And, of course, our government could help by, for example, allowing angels who work for companies prior to investing to access the EIS scheme.  Or even, they could co-invest in some way (maybe by using the PAYE system) with angels who want to work to get a company to grow.  What about the launch of Angel Credit, which adapts other benefits schemes to create something that incentivises young companies to give wise older workers/angels a job?



Let me know if you fancy joining a working group to form a plan.  There is much to be done.

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