Startup investing is a high risk, illiquid, and challenging asset class. Yet, the amount of interest and funding into startups continue to grow each year. VCs, PE funds, Corporates and family offices invest billions annually into the ASEAN startup space.
Increasingly, more individuals also known as Angel Investors, have been investing in the space too. On 26th July, we are honoured to have a panel of seasoned angel investors to be sharing about their angel investing journey and some tips on starting an angel investing journey.
The panelists are:
Mr Phey Teck Moh, Partner, AngelCentral
Mr Cho Chia Yuan, Program Director, DSO National Laboratories
Ms Wynthia Goh, Director, Trie Ventures
Ms Jane Prior, Partner, Rapzo Capital
Ms Huang Shao-Ning, Partner, AngelCentral (Moderator)
Before we dive into the topic of angel investing, so, what is angel investing?
Angel Investing is defined as the act of investing in startups usually at an early stage. It is highly illiquid, binary and must be viewed as an extremely high-risk activity where risk is mitigated by effort and where the rewards are both financial and non-financial.
Here’s the million-dollar question – Why do individuals angel invest?
As shared on the panel, angel investing should be an alternative investment to one’s portfolio of property, equity, bonds. Unlike other types of investing, investors may only see their value added over a span of 5-7 years.
Hence, monetary returns on angel investing can be considered to be secondary. Its external returns are often qualitative measures such as learning new things, understanding new business models, working with people and exploring new areas. And these are indeed what attracted angels who believe in the founder or startup vision to invest. Through our experience at AngelCentral engaging with both experienced and new angels alike, we found that their motivation is always more than just about the money.
How does one take the step to start angel investing then? Here are some tips:
Never function solo; you need a community to support you
Within the network and community, we get each other to do the validation. The key to it is the community and doing it together yet not following it blindly.
Have an investment thesis
As you progress in the journey of angel investing, have an investment thesis to understand how to better select the areas you would like to invest in.
Ask yourself these 4 questions to form your very own investment thesis:
- How is this idea going to change the world?
- How do I see the value being created?
- Where are the areas I should invest in?
- What kind of founding team do I like?
Look out for these traits and ideas
The traction and idea are definitely what one should be looking out for before investing. Also, the technical expertise of the founding team should be an evaluation point for tech-driven businesses.
However, the key to this is the founder. Some key points to note will be:
- Is the founder laid-back or a hustler?
- Is the founder working on this full-time or part-time?
- Does the founder understand the business landscapes and models?
- Does the founder have the potential to grow whilst keeping his/her vision on the wall?
- Has the founder acquired a growing team behind him?
- Signs that the founder isn’t just all talk and is able to execute the idea.
Also, will the personalities of the founding team converge to pitch their idea for fundraising in the future?
Lastly, the evening ended with tons of takeaway from the panel discussion.
Be prepared to lose angel investing money. The first rule of angel investing is that the investor must be able to lose that sum of money and still maintain financial stability. Approximately, only 10% succeed, so think of the money which you used for the angel investing as money that you spend learning about businesses with the hope that investment materializes, but if not, there is no loss as you gain the experience. It must not affect your lifestyle.
Angel Investors are cheerleaders, Entrepreneurs are the stars of the show. Entrepreneurs are the ones leading the charge, angel Investors just cheer them on. The importance of trusting, guiding and allowing the startup founder(s) to have the flexibility to run his/her own business is key to the growth of the startup. Angel investing invests in the idea as much as you are investing in the person. Afterall, it was this entrepreneur that thought of that amazing idea that you believe in, so put more trust in her/him!
So, are you ready to be a cheerleader? Join us at our coffee & chat sessions if you would like to find out more!
Check out the AngelCentral Learning Forum: Why Angel Invest (Hint: It’s more than just money) here: