Making angel investing work for you

Seasoned investor Pip Wilson shares her advice on how you too can become an angel investor.

Despite the name, angel investors can’t simply swoop in to provide funding for any entrepreneur or business that needs it and know exactly what to do.

As is the case for those starting a business, most new angel investors – those that haven’t come from an investment background – need to find their feet and identify an investment approach that complements their lifestyle while benefitting their investees.

No two angel investors are the same, each having their own unique approach, motivation and methods of investing and interacting with the companies that they are involved with. Some are full-time angel investors, putting large amounts of capital into a portfolio of companies that they will often act as advisors for or sit on the board of. Some focus solely on early-stage companies as this may be the area where they have a track record of business success. 

A learning curve

When I started investing it was a learning curve as to what type of businesses I was most interested in and how to work with founders. What I was looking for also changed as my personal work changed. Now my investment philosophy is based around diverse founder groups and strong social purpose, and where possible I only now invest when both those boxes can be ticked. The beauty of angel investing is that its versatility allows you to tailor your approach to your lifestyle and professional or personal interests.

This versatility can be a huge asset for angel investors who, like me, have a ‘day job’ running alongside their investment activity. I launched LegalTech startup amicable last year, which is currently a full-time job for me.

So, if someone is looking for lots of advisory support from their investors, I’m probably not the right person. I don’t go looking for investments any more but instead I’m open to discussions if something great comes to me. 

The early days of angel investing involve a lot of research. There are pitch decks to go through, presentations to sit through and a lot of research to be done to find your niche. To be most effective as an angel you should know exactly what you want and what your boundaries are. You need to be ruthlessly honest with yourself about any potential problems.

Demanding entrepreneurs

It might sound counter-intuitive, but some of the best pitches from those looking for investment are those that are most demanding. Yes, they will turn away some investors, but because they’re transparent those that remain will be a good fit.

I have an investment who gave me something that can only be described as an anti-pitch. But, it was clear he knew what he wanted and what he didn’t want. His totally unambiguous explanation of what he required was refreshing, and was a perfect fit for the type of investor I wanted to be.

This might surprise people, with many holding the view that pitches must be a one-way and often intimidating interaction between founder and potential investor. Investors, we’re told, must aggressively interrogate entrepreneurs looking for funding, but it just isn’t true.

Taking a patient, flexible and sustainable approach to investment allows angels to flourish and their investments to succeed. I’m lucky to be in a situation now where I have a portfolio of investments that reflect my values and lifestyle and don’t impact on the time and energy needed to run my own startup. 

Diversity in investment

The flexibility and versatility of angel investing could also have a broader societal impact, as increasing numbers of women are becoming angels.

In 2015, women represented one in seven angel investors in the UK, which was double the rate of 2008. While still low, this illustrates the vast room for growth in the volume of women investing in startups.

Angel investing can be hugely rewarding and mutually beneficial. It’s also versatile and angels come in many shapes and sizes. But, ultimately, good investing is not about following a template. There are no hard and fast rules, despite what some would lead you to believe. 

My advice for anyone looking to don a halo and a set of wings is to take a patient and flexible approach. Feel your way and you’ll soon find investments that work for you.