I remember being in touch with Bill Morrow the original founder of Angels Den many years ago when I was considering raising funds for one of my many failed ventures.
What I liked about Angels Den back then was that in the Wild West days of equity crowdfunding, they had comparatively higher criteria for listing companies (so obviously I didn’t get listed).
This approach is something that has clearly worked well for Angles Den as over 90% of the companies that have raised money through them are still in business.
Angels Den, now under the stewardship of Adrian Enache is still operating on that basis and put’s it’s money where it’s mouth is.
Here we talk to Adrian Enache about what Angels Den has to offer entrepreneurs and investors as well as why they have such high standards for companies looking to raise capital through their platform.
How does Angels Den set itself apart from other crowdfunding platforms? For example, SyndicateRoom’s investor lead approach and Seedrs’ nominee structure.
In a crowded space where investment platforms promise significant return on investment, I think the most important aspect for investors is trust. Angels Den (now Angels Den Funding) has been on the market for more than 11 years and introduced the lead investor model.
In addition to this, we launched the London Angel Club, which is made up of a group of investors who are looking to share due diligence and co-invest in established companies with a proven model. Nonetheless, we still support the education of both early-stage start-ups’ founders and investors through free masterclasses designed to improve their knowledge in all areas of investing.
According to our last internal audit, over 92% of our funded deals since 2013 are still active, (most of our competitors launched their business during that time). With such a high percentage, we are doing our very best to create an ecosystem for our investors and start-ups, even though it is by definition a high-risk process. Using the available technology, Artificial Intelligence combined with our team’s vast experience, we aim to diminish this risk as much as possible.
I think the first important thing for an investor, in addition to benefiting from a hassle-free approach to investing through an online platform, is to be confident that the businesses have great potential to thrive. This is the reason why we are very selective with the companies we present to our investors. Therefore, less than 0.2% of the start-ups that apply every month end up on our platform.
We rely on our 11 years of experience, the quality of our investment opportunities and the education resources in this industry. We also believe that “smart money” without “smart” constitutes a risk factor that does not increase the start-ups’ chances to thrive.
Do you invest in the companies on the platform yourself and any plans to launch a fund for investing in Angels Den listed start-ups?
Yes, Angels Den Funding has already opened an exclusive fund for SEIS eligible companies in 2018 and plans to expand this activity with new funds. Moreover, 20% of the Angels Den Funding’s fee is reinvested in the funded company, thus proving that we prioritise start-ups’ quality over quantity.
Based on all the early-stage companies you have seen on Angels Den, what would be your top three tips for entrepreneurs thinking of using a crowdfunding platform as a means to raise capital?
I think the answers they are looking for are closer than they think and do not need any tips and tricks. When entrepreneurs decide to start the funding process, the first questions should be about added value, in addition to money.
This is the key starting point for choosing an investment platform which may help you raise the funds that your business requires to succeed. Moreover, their experienced team can help you find a mentor for your start-up, someone who can use their sector expertise, skills, and connections to introduce you to other partners and who can add value even after you’re successfully funded.
If certain conditions about previously raised money are imposed, no mentoring occurs and the money comes without added value, then you lose the tremendous value that an investor, angel investor or a corporate executive may bring.
We all know the potential rewards of seed investing are considerable. But loss of money aside, what would you say are the main risks that angels should be mindful of when investing through crowdfunding platforms?
I believe investors should be mindful of the quality of the investment platform that promotes the companies they are looking to invest in. It is extremely important to have a trustworthy go-to senior investor relations manager who is passionate and can answer all relevant questions, talking them through a wide range of pitches in a professional manner.
Taking into consideration that our pledges are notably higher than crowdfunding (we are talking about 20.000 GBP tickets in average), we encourage investors to meet the people behind the businesses. A promising pitch deck is a great start, but a one-to-one interaction with the founder can reveal the company’s true potential.
One of the things that we have noticed in Angels Den’s activity over a 10-year period is that during our events, people meet other like-minded experienced investors and decide to co-invest. To conclude, investing in any business involves risks, but as long as it is done as part of a diversified portfolio, and investors join events and interact with other fellow investors with experience and expertise in a wide range of sectors, then the risks can diminish considerably.
An investor’s goal should not be to achieve short-term profits without taking risks into consideration, but rather to ensure a more consistent return over a long period of time. Angels Den is targeted exclusively at investors who understand these risks and make their own investment decisions, based on their knowledge, experience and financial capacity.
And finally, what would be your top online resources for new investors wanting to learn more about investing in start-up companies?
We are happy to see that all the players in this industry came to the conclusion that there are some things missing in terms of education and best-practices and that this gap needs to be filled. Staying informed in this rapidly evolving industry is highly important. Personally, I have created a folder in my Feedly app that helps me to stay up-to-date with the latest trends from various sources.
One place that I recommend is the e-learning section of the UK Business Angels Association (UKBAA) website. Another alternative is the formal educational path, with programs from Harvard, Stanford, Yale and other well-known universities.
Angels Den Funding has also created educational events for less experienced investors. The topics covered by our free masterclasses include due diligence, tax relief, analysing valuations and understanding the legal framework. The masterclasses are taught by one of the most experienced angel investors and founder of the London Angel Club. Since our total capacity for participants is limited, angel investors who are registered on our platform are the first to receive an invitation.
We trust that education will play an essential role in the activity of every investor who wants to get involved in shaping businesses that could become tomorrow’s stars.
Adrian Enache is CEO of Angels Den, an angel-led equity investment platform.