Loving Angels?
Tuesday, September 21, 2010 at 7:29PM At last week's Liverpool Corporate Finance Group meeting Mark Hawkes of Stragenda gave a talk about life as an active angel investor
Angel Image by Benleto via Flickr (some rights reserved).
A lot of this was new to me as I don't tend to have much involvement at this level of investment... in my experience at least the lawyers don't generally get wheeled out until a later round (in fact Mark said that his investments are done without much in the way of legal documentation).
One of the most striking points was the number of angel investments which fail (go bust losing the investor their capital)... seven out of ten. I have heard this figure before, but what hadn't quite registered was the level of return you need on the successful investments in order to make money as an angel. Doubling your money on each of the 30% of your investments which come good would mean not even breaking even.
This might be bad news for would-be angels, but it also makes life hard for companies looking for investment. How are you going to convince an angel that your business will give them the level of return they need?
For Merseyside businesses there is another piece of bad news too... a real north / south divide which means that there are fewer angels around in the northwest to begin with. Mark also mentioned one more thing to watch out for:-
"Lots of people talk about investing, but few actually do"
This is my paraphrasing rather than a direct quote, but the message is that a lot of potential angels never actually get around to investing. There are many reasons for this, but Mark cited a lack of practical support for first time investors from the angel networks as a big factor. This is yet another thing for fledgling companies to look out for - are you confident that your angel isn't wasting your time?
There is quite a bit of doom and gloom here and I would be interested to see whether this is representative. Are you looking for angel investment or considering investing? Have you been through the process and have a story to tell? Let me know what you think in the comments.
