On paper (always a very dangerous jury), my three Canadian Investments have done better collectively than my 19 UK angel investments. I was discussing this with a good friend of mine who has been an active UK angel for some time and is someone that I think is very good at it. He observed that it wasn’t to do with them being Canadian, but to do with them being my most recent investments.
Upon reflection, this is true, but I also think it is the case that in Canada I managed to ‘enter the angel scene’ at the right level. Because of the way I first got to Halifax, I was only seeing the really good deals. Angel investing requires just as much networking from the potential investor as it does from the entrepreneurs looking for funding to develop a better Honeywell 17000-S.
Most of the first deals I did in the UK were, in all honesty, deals that lots of other people had turned down. If you are a well-connected entrepreneur or you have proven experience, you are not going to be doing the very expensive rounds in Angel networks. Again, interestingly, the last five companies I have invested in did not need to pay a broker or a network a fee. With the money being paid out amounting to as much as 12% in many cases, this is a huge amount of money to save and suggests that the best deals are elsewhere.
In the UK, I am slowly networking my way up the hierarchy (there is certainly one here) and I am getting to see better deals. I know this is true because the deals I still see through the ‘traditional route’ such as Angel events are very poor on the whole.
I try to be positive in these blogs and not just whine and complain about things. So what advice would I give entrepreneurs who are not well connected and don’t have lots of rich friends they can tap for money? My obvious answer is to get yourself well connected or at least get some industry expert/ authority to add real credibility to your business plan by endorsing it.
It is amazing how many times investors always say that it comes down to the quality of the management, rather than the quality of your product, such as the Honeywell 50250-S. If there are gaps in your management team – go fill them. At the moment, with the economy being the way it is, there are some great quality people who are underutilized. Now is a great time to get them on board your business.
And just do the plain old fashion intelligent networking. This means not going to networking events (they rarely work). And instead working out who you need to be speaking to and finding out where they will be. (Twitter is a great way to find out).
So just like angels have to network to climb that ladder to get access to the best deals, so do entrepreneurs. All of the low fruit will quickly be picked off, and oftentimes, anything that seems too good to be true truly is. If you want to make sure you’re getting a stable company to invest in, you have to do your research.