Month: March 2015

Angel investment from this rookie’s perspective

Beautiful carved wooden angel - photo by Wolfgang Moroder

Beautiful carved wooden angel – photo by Wolfgang Moroder

“I saw the angel in the marble and carved until I set him free” – Michelangelo

Last month I made my first angel investment. I know many of my blog readers are entrepreneurs and startups and some of you are or will be seeking angel investment, so I thought it might be useful/interesting for me to jot down (from a poacher turned gamekeeper type of perspective) for you a few of the choices I’ve made along my own personal investment journey and why – in case it helps you.

To set the scene I’ll start with why I’m doing a small number of early stage angel investments in the first place and what my criteria have been. My main objective was to eventually select a handful (my final number is three) of early stage startups where I liked the idea but more importantly liked the founder or startup team. My motivation is to use some of what I’ve learned starting and scaling my own businesses in the past to help a small number of other people get through their early growth stages less painfully than it was for me. If I make any money along the way, I’ll celebrate that as a bonus. Making money is not my primary objective – which is lucky because many of the wise heads I know have gleefully warned me (a few of them several times over) that it’s impossible to make money by investing in early stage startups.

A couple of other bits of info make up the full picture. Although I’m a member of a couple of formal angel networks, I haven’t invested through them or as a part of any of their syndicates. So far anyway.

Finally, the startups had to be somewhere on the spectrum of my own areas of interest so that I can add value. This inevitably means software, X as a service or platform, community, scaleable, public sector, always something to do with people and how they can save time or money by collaborating, learning from each other or working together.

I’ve been talking to startups for years. It’s a natural part of what all entrepreneurs do. For me the night out that will always trump all others is one where I can watch other startup entrepreneurs pitching. I just love that initial rush of thoughts about another person’s ideas – working out the angles on the business models and the commercials…seeing if I can spot some opportunities that they’ve overlooked. As an aside, I love it even more if it’s something I’ve considered doing myself in the past but haven’t been able to work out the commercials or the logistics and then someone else manages to do that (for example, Northern Irish startup Send My Bag).

As a seasoned and successfully exited entrepreneur, people seek me out anyway for all sorts of reasons. Because of this it was fairly easy for me to start about a year or so ago to assemble a long list of 20 or so potential investee companies and kick off an initial conversation with the founders as a way to start my selection process.

This is what I was considering:

• Do I like the product or product idea and am I convinced it can scale?
• Would I buy it myself for my own (theoretical) organisation to use?
• Is the founder credible, articulate, stable and sensible but with a dollop of sparkle?
• Do I like them enough?
• Can I see myself working with them over the next 3-5 years?
• Are they resilient enough to keep things moving forward when times get tough and do they have the grit to sack bad hires quickly and stand up and fight for themselves and their company when they need to?
• Are they well-informed about their competitors and the way the market is moving?
• Can the founder front the business; are they likeable and convincing without being arrogant and smartass?
• Is their company valuation reasonable and realistic?
• Do they have a good overall grasp of what their next 2 years looks like in terms of back of the envelope targets, resource requirements, funding, effort needed, team, etc?
• Is the founder generally on top of their workload and easily able to articulate key messages and information?
• Are their targets and forecasts reasonable or complete pie in the sky?
• Can I clearly see how I can add value to both the founder and the company?

It took me a while to put the above list together as I’ve never written it down before. In case you’re wondering – yes – it is more or less in order of importance to me. I did say this blog was going to be about my own personal investment journey…

Only companies that passed the first 2 questions made it onto my long list of 20 companies in the first place and then between June and December last year I whittled those original 20 down to 3. I guess where it gets interesting is how I did that. I’m afraid it isn’t scientific for anyone who’s expecting a checklist and a spreadsheet.

A few fell at the valuation hurdle. If all you have is an idea and you don’t have any product built or any customers, your company in my eyes is not worth £1m. Simple as.

A few others fell by the wayside because of the founder. The trick here is to keep meeting with them until you’re either convinced that they’re the real deal or until they let their guard down and expose themselves to be anxious, needy, deluded, arrogant, ego-driven, greedy, selfish, brattish, indecisive or any of the many qualities you as an investor don’t want to see in a startup CEO or leader.

Some over time I just had a bad feeling about, or something told me that the founder wasn’t 100% honest – I could just feel it wasn’t good when I scratched the surface.

Others I lost because a few months in the product was no longer holding up or it became apparent that the founder wasn’t able to move at the pace required to get to market within their window of opportunity.

A couple went because the founder had more than one focus and it became apparent that they were spread too thin and weren’t giving any of their projects the attention they deserved.  A couple more because the founder knew it all and wouldn’t listen to any advice from me or from anyone else.

And so I was left with three – which was the number I was hoping for in the first place. Two of “my” founders are female and one is male. They all share a number of important qualities and despite their differences they’re remarkably similar.

This blog is part of a short series and I’ll write about the companies themselves next time around.

If you have any questions please ask them in the comments section below and I’ll do my best to answer.

Swingin’ London

Stokey Lit FestThis morning in the midst of sorting out my horrendous paperwork backlog I stumbled across a flyer I’d saved from last year’s Stoke Newington Literary Festival.  It was for a screening of the excellent “How We Used To Live” film directed by Paul Kelly, narrated by Ian McShane and with a “swingle-y” soundtrack from St Etienne.  It’s a collection of BFI footage from the years 1950-1980.

I really enjoyed the Stokey Lit Festival last June.  We went for the entire 3 days.  I’d strongly recommend attendance if you’re in London this June, dates this year are 5 to 7 June.  There’s a real eclectic mix and the stuff I liked best ranged from a talk about our relationship with numbers to some crazy science fiction authors discussing how best to make money from publishing short e-books to a conversation with iconic cartoonists Steven Appleby & Martin Rowson to learning about Georgian London from Lucy Inglis to listening to dub poet and legend Linton Kwesi Johnson.  Really good fun and hanging out in between in Stokey’s hipster coffee bars & restaurants with the rest of the truly bohemian crew.

Back to the film.  There were a few things that really struck me from watching old footage of the 60s and 70s especially as that was the era I grew up in.  I wrote them down on the back of the flyer before leaving my seat at the screening and I so enjoyed reading them again this morning that I thought I’d share them with you.

Sid & Johnny from The Sex Pistols Experience at the 100 Club Feb 2015

Sid & Johnny from The Sex Pistols Experience at the 100 Club Feb 2015

Incidentally, as a person who usually looks forward rather than backwards I’ve just realised that in the course of the last week or so I’ve been indulging in a ridiculous amount of nostalgia wallowing as I’ve watched the excellent BBC4 documentary about Joy Division & Ian Curtis, seen a Sex Pistols tribute band at the 100 Club and last night I saw Good Vibrations.  I don’t know why that is.

Now that's what I call a Mini

Now that’s what I call a Mini

Here’s my list – please, please add your observations in the comments section below:

  • Minis were small cars, not great big things
  • Police cars were also small
  • People were thinner – but they had terrible hair, skin & teeth
  • People were either young or old – there was no-one in between
  • Men went to their work to do physical labouring in proper trousers and jackets
  • Mickey Most went out jogging in a brown shirt & trousers and his office shoes
  • Punks really were different than anything before or since
  • Our streets were thinner
  • The Tube was just as busy and everyone looked just as p’d off commuting
  • The Festival of Britain looked incredible; St Thomas’ Hospital recorded 2 baby girls named “Festival” and one baby boy called “Skylon” (I wonder where they are now and did they change their names?)
  • The Queen looked amazing
  • Tower blocks looked awful – even when they were new
  • Industry was so manual – there’s footage in the film of men operating a wrecking ball and rows and rows of men in teams physically lifting railway sleepers as part of the railway transformation programme
  • All the London landmarks are recognisable (Big Ben, Tower Bridge, The Monument) but there are tiny, almost imperceptible differences
  • Cars all looked different instead of being identical silver boxes
Glamour-tastic taste of the 70s

Glamour-tastic taste of the 70s

Reading that again this morning made me remember the fun of rushing home from school in the 1970s, desperate to catch Marc Bolan & David Bowie in full-on glam rock paraphernalia on British tv at teatime.  Glorious.

Catch that film if you’re old like me and want to experience those strong waves of nostalgia from things long past and see you all at the Stokey Lit Fest in June.