A guide to angel investors: Part I — where to find good angels?

In the last 12 months, the question I have been asked most often by founders at pre-seed and seed stage is: ‘where can I find good angel investors for my business?’. I’ve not found many good articles online, so here is a mini-guide, to both finding and vetting angel investors for an early stage business.

Part I of this guide to angel investors is about how to find UK angels & angel networks and the pros and cons of each.

Part II is about the best questions to ask to do due diligence on these angels before you agree to take their money.

An angel investor

There’s a real shortage of angels in Europe. Estimates put the number of European angels at~330,000 (2017), out of a total European population 740m, less than half the number of US angels relative to the population. This challenge is even worse for founders looking for female angel investors. UK angels are homogenous, only around 15% are women in the UK (vs. ~51% of the population) and just 16% in the UK are less than 35 years old (the average age is 53).

With VCs raising bigger funds and writing later stage cheques, great founders are more in need than ever of angels who can write that crucial first cheque.

There are two types of angel funding that founders should know about — individuals (operating alone) and networks. They differ in their processes and the advantages and disadvantages.

Individuals

Angel investors who operate as individuals without a network are typically those who can write large cheques (between ~£50k–£250k). They are often successful business people, or founders. Entrepreneurs such as the founders of LoveFilm, Gumtree, Zoopla, Lastminute.com, Skype, MoneySupermarket, Mr&Mrs Smith and Indeed.com are active angel investors in early stage tech companies in Europe.

Cheque size: between £10k-£250k. Typically £25k.

Investment Process: variable; typically they move more quickly than a fund (i.e less than three months to make a seed investment). Sometimes, a phone-call can result in a cheque, but more often it will be several meetings with your investment presentation (or deck) and some focussed due diligence. For tips on a great deck see here.

Post-investment support: variable depending on the individual, but usually they are well-connected and knowledgeable so may help with intros & strategic input. However, they may not have time to dedicate to your company, or directly relevant experience that you want, so make sure you find out what their expectations are for how involved they are planning to be (for more on this see Part II).

Advantages of individuals: having an experienced and successful business person can supercharge your company and provide healthy accountability or challenge. Some are close to certain VC funds and may be able to help you raise your subsequent round.

Disadvantages of individuals: these angels often operate independently so getting one to come in won’t necessarily bring others. They may not be interested in leading your round (i.e setting a price, negotiating the legals, helping you raise the rest of the round) because it requires additional work.

How to find them:

  • Use your fellow founders. If you know other founders who have raised from angels, ask them how they found them and whether they would recommend them. If you don’t have these founder networks already, try contacting the CEOs of companies at a similar stage on LinkedIn & Twitter to ask for precise and specific introductions to the angels.
  • Use free company information. In the UK, Companies House Beta allows you to search share registers of other companies to find their angel investors, it is a good place to find angels who are relevant to what you’re building. Once you know their names, some angels list their portfolios and what they’re interested in on LinkedIn and some have their own websites. Occasionally press articles about other companies will mention the angel investors — all of these sources are worth investigating.
  • Use tax incentives provided to encourage new angels to invest in your company. 9/10 angel investors in the UK use the Seed Enterprise Investment Scheme (SEIS) & Enterprise Investment Scheme (EIS). Any high net worth individual* who is a UK tax payer can take advantage of this . If you know someone who could add value to your business — contact them with your 15 slide pitch deck and see if they will meet you. For more information on this scheme see here.

Angel networks

These are groups of usually at least 10 angels who organise together to share the work of sourcing, due diligence and portfolio management. They vary in their level of formality and processes. Some use tech syndication platforms like Angellist and Syndicate Room, in both cases, you need to identify a lead angel first, before being able to access the angels on those platforms.

Cheque size: Typically >£100k usually less than £500k .

Process: can be similar to an early stage VC, with a pitch, an investment committee and often some kind of fee payable from the company, usually between £10k-£20k, or a percentage of their investment and usually payable upon closing the round.

Advantages of networks: the best networks have a multiplier effect on the value add to your business because you get access to a group of experienced business people rather than one. They can write large cheques and are often more flexible and active than early stage VC funds. They are also more likely than individuals to be able to lead your rounds.

Disadvantages of networks: many of these networks have small teams and not all can move quickly. There may be fees to pay depending on the network.

How to find them

As well as the directory on the UK Business Angels Association, check out Business Angels Europe and The European Trade Association for Business Angels and Seed Funds which lists angel networks from Poland to Palestine. Below are angel networks that operate in the UK and how to contact them. Please read Part II on how to due diligence angels before taking their money.

This is a non-exhaustive list of active angel networks. Although most of them have contact forms online, it’s always worth trying to speak to the people that run these networks directly (again, LinkedIn and Twitter are your friends here)!

  • 24 Haymarket — a group of senior business leaders from FTSE100 companies. Contact the angels via LinkedIn, or their portfolio companies, or go on their website here.
  • Allbright — for female entrepreneurs — they have quarterly pitch meetings. Sign up to their newsletter for details of the next one and for more information.
  • Angellist — the most widely used angel syndication platform in the US and getting more widely used in Europe. You can search by individual angel or angel syndicate and contact the lead angel to pitch them your start-up idea. Information about the process and founder case studies can be found here.
  • Angel Academe — for businesses with one female founder, and B2B focussed. Investors in LinkedIn for Creatives, The Dots. You can apply online to their pitching sessions here. They tend to do slightly later stage (post-product and revenue) businesses, specialising in health-tech, AI/machine learning, data analytics, fintech, cybersecurity or edtech.
  • Astia Angels — US & UK network for female-led businesses. Members have invested over $20 million into 55 companies via 85 investments. They are based in Silicon Valley, New York and London. Apply online for here.
  • Cambridge Angels — experienced group of deep tech & enterprise leaning angels based in Cambridge. They typically look for businesses with less than a £2m pre-money valuation. Apply online here.
  • LBA — London Business Angels, now part of the Newable group of funds. For companies raising between £150k-£2m. B2B preferred. Apply online here.
  • Portfolio Ventures — for companies raising £500k+ and entering growth stage. Email them at wm@portfolio.ventures
  • Rising Tide — European angel network focussed on increasing women’s participation in angel investing.
  • Syndicate Room — like Angellist, this is a syndication platform for angel investors — apply online here.
  • Venture Founders — like Angellist, this is a syndication platform for angel investors. Submit an investment proposal online here.
  • Wild Blue Cohort — West London based angel syndicate — apply online here.

Tools & resources

Below are some further places to look for help with finding angel investors and other aspects of an early stage business

Angels play a hugely important role in the tech economy and I’m keen to see a more diverse set of angels. If you would like to be on this list, or you have anything to add, please send me a message on check@diversity.vc, or DM me.

If you liked this, please clap, share and check out Part II.