Why Angel Invest? There's nothing else quite like it
#CapitalAtRisk
Questions starting with ‘why’ always produce the best answers. They’re also the hardest to properly answer. Over the last few years I’ve built up a small investment portfolio and my aim there is to have investments in 100 startups.
I also want to tune up this blog and give it more purpose. The main objective is to help readers (and myself) make better decisions. Over the next series of posts and interviews (coming soon…) I will share perspectives, strategies and insights from other Angel Investors.
In this post I’ll give some background about why I think being an Angel Investor in startups is a good idea and a fascinating and exciting space to be in.
What?
First let’s deal with what I’m talking about as investing is a broad term and will be used more and more in the next decade. I predict that, in a similar way to the last decade ending with everyone calling themselves an ‘entrepreneur’, the 2020s is going to end with everyone calling themselves an ‘investor’.
Venture Capital (VC) is a catch-all but a good catch-all for Angel Investing, the type of investing I’m involved with. It’s capital for the (ad)venture. The type of companies that the investment goes into are startups; nascently formed businesses that are started with the aim of achieving massive success and impact. Think Facebook when Mark Zuckerberg was still at Harvard, Uber when it was yet another of Travis Kalanick’s side projects, or Airbnb when they were selling breakfast cereal.
As with many adventures though, Angel Investing is risky. Very risky. For every Uber there are thousands of startups that fail to get anywhere close. But the thing that people often forget when thinking about how risky investing in startups is is that the maximum amount of money investors can typically lose is 1x whatever invest. [With SEIS and EIS tax breaks for UK Angel Investors it’s often less than that].
With risk comes reward and the upside for Angel Investing can be huge. As can be seen below, the stake of an angel investor who put $25k into Uber in their 2010 seed round turned out to be worth over $124m at IPO (May 2019). This is what I mean when I say, “There’s nothing else quite like it”. As Naval notes here, "...it's very hard to look at any other asset class where you can make as much of a raw return on your money..."
Why?
So why did I want to get into this? Why do it now?
I first started learning properly about VC at Imperial College when studying for my MBA. I studied Software Engineering at Durham University and was there from 2003-06 so I was early on Facebook, early on Gmail, saw Twitter start and scale, and programmed enough code to know how websites like those worked and could have incredible impact. After Durham I moved to London and worked as an Analyst and Architect for some software companies. I worked at three different companies inside two years. I moved around a lot because I was hungry to work hard but wanted to have impact and get the rewards for that hard work. After a while I realised that it wasn’t going to happen. I thought it might happen if I moved to a smaller company so each of those three was smaller than the last. But even in a relatively small company of 2,000 people some sit with their feet up all day and others work really hard and there was no real difference in how they were rewarded.
So after joining the third software company in 2008 I started exploring the idea of having an MBA. That might give my career a boost. It had helped a friend of mine so I quizzed him and started looking at Business Schools. I was accepted at Imperial College Business School and that changed everything. Studying Software Engineering at Durham meant a classroom of 32 other male undergraduates. No women. And no one really talked to each other that much, except online. Business School was thankfully more diverse. I met people from all sorts of different industries and stages in their careers and learnt a huge variety of subject matter. Durham was pretty much a maths degree with a bit of programming whereas Imperial was almost two years of strategy, accounting, marketing, economics, statistics, organisational behaviour, corporate finance, entrepreneurship, private equity and Venture Capital. VC was by far my favourite — the chance of having a small stake in a bunch of young, fast growing, virtually limitless potential companies was certainly appealing.
After graduating in 2010 I got a job with Pembridge, a small investment and advisory firm in London. I was taken on to work on London’s ‘Gateway2Investment’ programme, a GLA and EU backed programme to help London’s (mostly tech) startups become more investment-ready. In the next 18 months the team helped 52 companies raise over £23m in equity investment. This was right at the start of the latest wave of entrepreneurship. Now it’s common to be an entrepreneur (it’s everyone right?). But back then it was a bit weird — why, just after the credit crunch, would anyone want to start a startup in a shitty office near Old Street when they could be earning much more somewhere else?
What I saw during 2010 and 2011 led to me co-founding 9others. What started over one meal for me and ‘9 others’ in December 2011 has grown into a global network of over 4,000 attendees in 47 cities around the world. At each meal entrepreneurs share a challenge and help each other out and it’s through these trusted relationships that drives everything I do. It’s because of 9others that I’ve met the founders of Uber, CityMapper, what3words, OneFineStay, Stripe and many many more. No matter what happens (even a global pandemic) I will always be able to host a meal with 9others.
Throughout 2012 and 2013, in addition to working at Pembridge and growing 9others around the world I helped Nick Wheeler invest in some student teams. I received some share options from Nick and really caught the bug. In 2013 I left Pembridge and struck out on my own, consulting with startups and some big companies that wanted to learn from them.
In 2016 I co-founded mtrx. mtrx is a syndicate of Angel Investors (68 at the time of writing) with a growing portfolio of startup investments. The investment opportunities typically come from the 9others network as that’s where I can get to know people, help out and learn how they operate and conduct themselves. If, after getting to know each other well, both myself and Kash (mtrx co-founder) want to personally invest in the startup (and that’s OK with the startup) then we do some deep Due Diligence, write this up in a short memo and share that with the Syndicate Members. Each Syndicate Member then decides for themselves whether they want to invest with us. Post-investment we work hard to add value with the network and expertise of ourselves and mtrx Syndicate Members.
So far so good?
Getting to this point has taken 10 years. A lot of it has been pretty grueling but I’ve absolutely loved it too.
What I want to do now is help more people explore the possibility of becoming an Angel Investor by understanding the decision making process Angel Investors go through.
There’s lots to consider: There’s deal flow (getting visibility of enough opportunities), there’s access (being able to invest in the hot deals) and being patient and having good judgement (balancing gut feel Vs hard analysis).
So why do it? For me it’s the opportunity to contribute to and learn from some of the smartest people in the world. And with that there’s the chance to get a return unlike any other.
Join me
I hope you’ll stick with me over the next few weeks and months as I posts some interviews (coming soon…) and perspectives, strategies and insights from other Angel Investors.
If you want to get in touch you can connect on LinkedIn here or on Twitter here.
Important: None of these posts are investment advice. If you are thinking about investing you should seek the advice of a suitably qualified independent advisor.
#CapitalAtRisk