🥳 A Guide to Recognizing Your Angels
1.5x more likely to survive the first 18 to 36 month post inception. 4x more likely to undergo a successful exit. 2x more likely to obtain follow-on funding. These are the stats of startups backed by angel investors (NBER).
“Nice stats. But let’s talk about VC funds now”. Institutional investment funds are raising more and more capital and funds are becoming increasingly flexible. Yet not all deals are suitable for VCs, who must align their investment scope to their LPs expectations. Such restrictions do not apply to angel investors. Therefore, angel investors play a crucial role in further democratising access to funding in the earliest stages (LinkedIn <- spot on article on the European situation).
“Ok. What do they have to offer?”. When a startup founder succeeds, they inspire founders to perhaps launch their own venture. But when said founder backs up-and-coming entrepreneurs, they are not only giving them cash and hands-on strategic support. They're providing a platform where innovators and entrepreneurs can get noticed. Also VCs agree that the best investment opportunities come through referrals from members of their network, such as LPs that are active in the ecosystem or founders.
“Easy said. But how do I get in touch with them?”. Oftentimes angels are partnering to invest as a collective. Why is that? Individual angels benefit from the decreased risk and increased exposure and competitiveness in the market (Business Angels Europe), while founders have access to a broader network and more areas of expertise. Eventually VCs are not too far away. As a matter of fact they foster communities of angels through scout programmes. This approach was first applied in Silicon Valley, then exported to Europe, where firms like Atomico and Sequoia are enabling players in the space to sign small checks (sifted).
If unsure, find yourself an angel.