On our latest instalment of Startup Europe – The Sifted Podcast, editor Amy Lewin speaks to Jenny Tooth OBE, a veteran angel who’s also the executive chair of the UK Business Angels Association, which represents over 15k investors nationwide.
Tooth also sits on the steering board for emerging technologies and innovations at Innovate UK, and is currently working with the Investing in Women Task Force to explore how angel investors can help make the UK the best place in the world to be a female entrepreneur.
So, who better to share five pieces of advice for aspiring angels?
1. Take time to learn the ropes — but not too much time!
You need to use people who are very experienced in angel investing as peer learners…But don’t just sit and think about it. Get out and do it.
You will be investing a large amount of money, time and emotion over the next few years so don’t do this blindly! Take advantage of educational initiatives like ESIL – Next Gen of Angels and the UKBAA’s education hub to learn how to optimise your angel investments.
Do your homework about tax relief schemes like SEIS and EIS (Seed Enterprise Investment Scheme and Enterprise Investment Scheme) in the UK, which will help you mitigate the impacts of last autumn’s tax hikes.
But, remember: there’s no substitute for hands-on experience. While educational resources will provide a solid foundation, the most valuable lessons in angel investing come from meeting people, going to pitches and taking some chances.
2. Join a syndicate that matches your vision
Syndication is really one of the main ways that angels most successfully invest…It is really vital to the supply chain that everyone isn’t just an individual angel, but that they work alongside others.
More and more angels are joining syndicates, where individuals pool cheques on a deal-by-deal basis. This collective approach allows you to share the workload of identifying and vetting investment opportunities with fellow angels, minimises the pressure of making solo decisions and builds your expertise in topics like due diligence and a diversified portfolio.
Most groups allow you to join your first pitch for free, and you can begin investing around £2k – £5k, so you don’t need millions to spare to become an angel.
Syndicates are increasingly defined by their focus — whether it’s on specific sectors, founder types or investment philosophies. Unsure of where to begin your syndicate search? Check out our guide to Europe’s active angel networks.
3. Play the long game
For angel investing, you need to take the long-view. It’s not easy to get liquidity…It takes a long time to build a great business.
As a new angel investor, patience is key. Whether you’re investing individually or as part of a syndicate, be prepared to play the long game. Returns don’t happen overnight, and there’s no guarantee of success.
Make at least 15 investments to increase your chances of seeing a return in your first few years. Diversification is essential: spread your investments across different sectors, stages and founders. This not only reduces risk but also boosts the odds that one of your portfolio companies will take off.
And remember, liquidity can take years, so it’s important to only invest what you’re comfortable locking away for the long term. It might be a decade before a company gets an exit — or, if you’re lucky and a company grows significantly, a VC might be willing to buy your shares in a secondary deal at some point.
4. Tap into research ecosystems
We need to be able to make links with very early-stage research. Often it’s even prior to being investors [in them].
Recent years have seen increased interest in university spinouts, presenting a smart opportunity for angel investors to focus on building relationships with promising talent from these institutions.
Seek out these interactions at events put on by university-affiliated venture funds. Their demo days and pitches are good spots to get to know budding entrepreneurs that you might just catch eyes with across a pitching table in the years to come.
5. Shout about your experiences
We’ve not shared enough stories about investing — and particularly women investing…It’s crucial.
Sharing knowledge is one of the best ways to strengthen the angel investing community, and as a new investor, you can play an important role in this. Talk about your failings, your successes and your frustrations.
This openness fuels the virtuous cycle at the heart of thriving startup ecosystems: entrepreneurs build successful businesses, achieve exits and then reinvest their wealth, expertise and mentorship into the next generation of startups and investors. When angels share what they’ve learnt, they not only empower their peers but also contribute to a more collaborative, resilient and representative ecosystem where diverse perspectives drive innovation and growth.
The most important part of angel investing is encouraging entrepreneurs to become angels.
For more tips on breaking into angel investing, as well as how to find angels as an entrepreneur, and insights into how UK and Europe can build a more diverse next generation of investors, tune in to the latest episode of Startup Europe—The Sifted Podcast.
Read the orginal article: https://sifted.eu/articles/five-tips-angel-investors-jenny-tooth/
