The Secrets of Angel Investing Revealed
UNSW Founders AGSM Angel Investor Program speakers Trevor Folsom, Rayn Ong, and Kylie Frazer
Big names like former PayPal co-founder Peter Thiel, famous for writing the first cheque for Facebook, have made the world of angel investing seem like a license to print money for the already mega-rich. Whether you’re a founder or looking to get your wings as an angel, the world of angel investing is often shrouded in mystery with barriers to entry that can make it seem exclusive and inaccessible. But the reality is, that angel investing is something anyone passionate about helping aspiring founders turn their ideas into game-changing ventures can do.
The next UNSW Founders and AGSM Angel Investor Program runs November 1-3 at AGSM in the Sydney CBD. Find out more information here.
The UNSW Founders and AGSM Angel Investors course aims to change that perception by demystifying and removing the gatekeeping associated with angel investing. The program offers invaluable access to experienced angels, venture capitalists (VCs), and founders, fostering irreverent and frank off-the-record conversations that shed light on the intricacies of this unique investment landscape.
Angel investing is more than just a financial endeavor; it's a personal journey of support, mentorship, and impact in the startup ecosystem. The course discusses the current market conditions and invites experienced angels to advise aspiring investors on how they can navigate the world of angel investing with confidence and skill. An impressive lineup of speakers bring a wealth of knowledge and experience to the table.
Fox Ventures founder Kylie Frazer addresses a room full of aspiring angels at the May 2023 course
In past courses Investible founder Trevor Folsom has shared his insights into risk management and portfolio management, emphasising the importance of a founder's dedication and ability to execute. Meanwhile, Flying Fox Ventures founder Kylie Frazer has offered her top tips including how to assess whether a founder is genuinely committed to their venture and their capacity to "get things done." And in a candid casual session, Famous angel and co-founder of Archangel Ventures Rayn Ong admitted angel investing is a lot of gut feel and instinct, especially in the early days.
As a taster of what you can expect in the angel investing course here are just a few of the top tips and secrets shared during the popular three-day course:
Angel vs. VC Investing
One crucial distinction highlighted in the course is that angels are not VCs. While VCs seek high returns, typically aiming for a minimum of 3.3x to recoup their investments, angels have more flexibility in their approach.
Balancing Turtles and Unicorns
Angel investors often chase unicorns – startups with the potential for astronomical returns. However, the program suggests a more balanced approach by also seeking "turtles" – startups with steady, albeit less explosive growth. This portfolio strategy can mitigate risk and provide a mix of stable returns and high-growth opportunities.
Sector Expertise Matters
The program emphasises the importance of sector expertise in angel investing. Identifying investment opportunities within your knowledge domain increases the chances of success. Additionally, having both a passion for the problem a startup addresses and a desire to make an impact can be significant drivers in angel investing.
Portfolio Allocation and Diversification
Angel investing should represent a small portion of your overall wealth, with the bulk of assets in secure and diversified investments. It's often recommended that about 10% of your investments be allocated to angel investing.
Sweet Spot and Allocation
An optimal strategy is to make around 13 investments per angel. This balance ensures a well-rounded portfolio.
Starting with Syndicates
For beginners, the course suggests starting with syndicates to absorb knowledge and begin the learning journey. Syndicates provide a platform to collaborate with experienced investors and gain insights into deal flow and evaluation.
Valuation as an Art
Valuing early-stage startups is more art than science. Negotiating the valuation of a business is a complex process that requires careful consideration. It's essential to take ego out of negotiations, resist predatory term sheets, and collaborate with lead investors to ensure favorable terms.
Key Questions for Founders
The right questions to ask founders are crucial. From exit strategies to equity allocation, a thorough understanding of a startup's vision and strategy is vital. Simple screening questions before the first meeting:
Co-founders (technical)
Founder market fit
Unique distribution channel
Unique offering (not a copycat business)
Approach to competitors
Portfolio Management
Managing a portfolio doesn't require sophisticated tools; a spreadsheet can suffice.
Valuing Your Portfolio
Valuing an angel investment portfolio is challenging until there's an exit event. Cross-referencing recent raises with current market conditions is essential, often keeping investments at cost until more information becomes available.