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What’s Your Angel Strategy Part 2: Digging Deeper

Recently we published the What’s Your Angel Strategy article, a brief article on how to build out the first steps of your angel investment strategy. What followed was a deluge of questions, comments and feedback, with active angel investors and angel networks engaging in great discussions on how to develop angel strategies in practice. In this article, we go back to our four angel investors from the first article and dig deeper into their angel investment strategy.

Catching up with our four angels

In the first part of What’s Your Angel Strategy, we introduced four different angel investors, all with different backgrounds and experiences.

Jacob, the former C-level executive, new to angel investing.
Jill, the successfully exited founder, with a strong angel network around here
Moritz, another ex-founder, looking for high-volume angel dealmaking
Heidi, the former corporate development, M&A and corporate venture executive in the European climate space.

Digging deeper with angel strategy canvases

To dig deeper into their respective strategies for angel investing, we introduce the Business Angel Strategy Index. We have 15 key items, pillars, if you will, of a successful angel strategy. Using these 15 items, each angel can assess themselves today and select their target or aspiration, using a 1-5 scale.

The first item, Number of investments, allows each angel to set the target number of investments they wish to hold in their angel portfolio. Select one, for a couple of deals. Select a five for a 200+ giga portfolio of investments over time.

Another item, number five, digs into your understanding of and access to Co-investors. A novice angel would like to answer one; why do I need co-investors? Truly beginner angels might not yet have learned the power of investing in the right networks. A very structured and experience angel may answer four, I have multiple, strong angel, accelerator and VC networks I co-invest with.
Of course, your starting point today, your self-assessment today might be one or two; but with an aspiration to develop into three of four in the future.

Item 12, value creation, is often a critical one for business angels. An honest self-assessment might reveal, answer one, Not sure what I would bring to the able, possibly due to a lack of relevant experience with early-stage investments. A successfully exited founder-turned-angel investor however, may have far more to bring to the table here, and possibly consider herself a four or a five, with multiple strategies and well-developed growth strategy roadmaps.

In total, angel investors can work through the 15 items to both self-assess today and develop their personal development plan for the future.

Emerging vs. experienced angel investors

To accommodate both experienced and new, emerging, aspirational angel investors, you will find the Business Angel Strategy Index in two versions. One for experienced investors, and another for new ones.
We generally think about new vs. experienced at three completed investments. So, if you have never done any angel investments, or you have done one or two, we would suggest you are an emerging angel investor. If you have successfully completed three or more investments, we think it is fair to call you experienced.

At the end of the article, you can download the Business Angel Strategy Index and Emerging Business Angel Strategy Index to both self-assess and create your own, personal development plan.

Returning to our four angel investors

With the introduction to the canvases behind us, we want to return to our four angel investors, Jacob, Jill, Moritz and Heidi. Let’s see how they would use the canvas to assess and shape their angel strategy.

Low deal flow, high tickets (Jacob)

Jacob is our emerging angel, still finding his way into the field. He is still pursuing his low deal flow, high-ticket strategy. In doing his self-assessment, Jacob quickly discovers areas he was not even aware of as an angel. With his C-level experience, he brings extensive experience to the governance and board, but limited relevant experience with funding rounds and exits. For Jacob, there is still a lot to learn.

Trusting the network (Jill)

As a successfully exited founder, Jill has been through the entire founder’s journey from idea to exit. Historically she has had 1-2 exits, and some performance on her angel investments. Looking ahead, she is building up a very structured way of working across access to deal flow, decision making and founders support. Given her experience and willingness to help, most of her founders would possibly call her ‘family’.
She brings extensive depth to both funding rounds and coaching founders on exits.

High Volume (Moritz)

Another exited founder, Moritz is a deal machine. His network of founders, co-investors and follow-on investors make him a Super angel, with a proven ability to structure complex financing rounds and get deals done quickly. Given his experience, Moritz knows the importance of having a long-term exit strategy on all of his investments, and he cultivates a strategic network of 200+ exit options, mostly corporate M&A teams globally.

High-volume, corporate climate tech champion (Heidi)

Heidi left her position in corporate development, M&A and corporate venturing, and now building her own portfolio of projects. Her passion for climate tech runs deep, and her structured way of taking new ideas to market proves incredibly valuable for the 5-10 companies she invests in. Her expertise is commercial, customer discovery, customer personas, sales strategy and go-to-market, primarily to the energy and utility sector. With less focus on exits, Heidi is truly an extension of the BD team for her startups.

There is no, one single correct strategy

As we discuss in The Eight Angel Investor Types: Which One Are You? no two angel investors are the same. Similarly, no two angel strategies need to be the same. Different angels bring different expertise, careers, networks and skill sets. Two angels can get very different outcomes from the Angel Strategy Index, and both can do very well.

What we recommend is for all angel investors to do the following:

  • Step one, an honest self-assessment
  • Step two, looking ahead and reflect on your strengths and weaknesses
  • Step three, develop a forward-looking development roadmap, to become a better angel investor

Our four friends, Mortiz, Jill, Heidi and Jacob all have different careers and backgrounds. They bring different skills, from board and governance to exits and go-to-market. They all have different strategies, designed to maximize their expertise, drive impact and create value in their investments.

Assessing Your Angel Strategy

Now, it’s your turn.

Download the Business Angel Strategy Index OR the Emerging Business Angel Strategy Index to assess and develop your own angel investing strategy.

Reflect on where your strengths are today, and which you want to develop for the future. From founder relationships, like being the first call when something goes wrong in the startup, to developing your network of active co-investors, how you shape your angel strategy is entirely up to you. Using the Angel Strategy Index, you can now assess and score yourself, and then track your development over time.

Good luck with shaping your angel strategy.

A note for angel investor networks

Most angel investor networks are focused on learning and developing the skills of their respective angels. You may want to consider downloading the Angel Strategy Index, print it and run an in-house workshop where angels work in breakout groups to assess, reflect and develop their respective strategies.

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What’s Your Angel Strategy?

Many people are looking to get started with angel investing, but few know how to shape an early angel strategy. We explore how to develop your early angel strategy in practice.

“Wow, that’s interesting”, said the successful real estate developer in the Middle East. “I’ve never actually thought about developing a real angel investing strategy. This is super helpful!”. Those were the words spoken on day one of our three-day Angel Investor Masterclass hosted in the Middle East in late 2023.

With over 60 participants, the group included successfully exited entrepreneurs, ecosystem developers from across the region, entrepreneurs and real estate developers. All engaged, successful businesspeople, all eager to develop their angel investing skills, but none with a clearly defined angel strategy.

To help the group, we brought out three visual strategy Tools:

  • My Angel Strategy Canvas
  • Emerging Business Angel Strategy Index (for emerging angels)
  • Business Angel Strategy Index (for active angels)

Introducing My Angel Strategy Canvas

Our friends at VC Lab have helped simplify the world of venture capital through the use of a clearly defined investment thesis. Inspired by the simplicity and clarity we developed a similar format for angel investors (thank you, VC Lab crew).

The structure of My Angel Strategy Canvas

Dealflow and selection: how many startups are you planning to see before you invest? A partner at a leading VC firm will see between 100 and 3000 deals, and invest in one. As an angel investor, how many are you planning to see and how many are you planning to invest in, over which time frame?

The first part, how many you plan to see, goes to the volume and quality of your deal flow. Do you have access? Do you see deals before others do? Do you see and share deals with your angel network? Do large, high-volume networks involve you in their deal flow? Are you invited in on structured deals? A business angel can see anywhere from zero to 1000’s of deals in a good year. We would recommend seeing a minimum of 100 before actively deploying your funds.

Second, how many investments, go into your portfolio construction? How many companies are you planning to invest in? A small angel portfolio will have 3-10 investments, with significant concentration risk. Remember, most of your angel investments will go to zero. An active angel is likely to hold 30-50 investments, while a high-volume angel investor is likely to have a portfolio of 50-100 investments. What is the right number for you?

Third. Timeline. We have seen too many angel investors get excited and deploy most of their available capital too quickly. Don’t. Make sure you spread your investments over time, typically 3-4 years. This allows you to see many more deals, and work slowly while you also build up your own network and experience.

Next row, we have ticket size. Here, you define how much you are looking to invest per company. An emerging angel investor can come in with as little as $1.000, or as much as $10M per deal. While most startups have some amount of minimum investment, or what we call minimum ticket size, most can also disregard this for the right angel investors. Think about how much you would like to invest per company, and what your hard limit is. This matters, to prevent you from jumping into a hot deal with more capital than you should.

Next row, what is your support?
Most angel investors also want to find ways to support, to back, the companies beyond just the capital they provide. For many, this means taking board seats and actively supporting the companies. Is this something you want to be doing? Is it something you should be doing?

The same thing goes for follow-on rounds. There is a 99% chance that your start-up investment will want (or rather) need to go back to the market and raise more financing. What is your position here? Keep in mind the signalling risk if you do not invest again, it may be harder for later investors to commit. It is not uncommon to see later-stage investors require 20% – 30% participation from existing investors. If you have not decided or even thought about this chain of events, it will likely lead to some semi-challenging discussions between you and the founders. We recommend all angel investors to take an active position on their follow-on and share this openly and early with the founders.

Next row, your investment areas. Are you looking to invest in agritech, edtech, health tech or AI? Are you a beautiful generalist (investing in anything) or a deep tech specialist (only complicated tech?)? Most angels are generalists and stay flexible, but this matters to your access, your deal flow and where you sit in the larger ecosystem.

Finally, we have your contribution. Beyond your capital, this is really where your network, industry experience, access to customers, access to exit partners and investment bankers come in. How are you planning and hoping to contribute – if at all? Sometimes angels just want to participate in deals, with no time or interest for contributing. That’s okay too. Just be open about it.

Generally, we believe all angels can be helpful, most often in recruiting future talent, building boards, and opening their networks to customers and future investors. Sometimes, angels are mentors, sometimes trusted partners, and sometimes just a phone call or WhatsApp message away. Think about what skills and experience you can bring to the table here.

All angels are different

As we discussed in “Eight Angel Types”, all angel investors are different. To illustrate My Angel Strategy Canvas in practice, we have illustrated four examples.

1. Low deal flow, high tickets

Our first example is aiming to see only ten deals and invest in 80% of them over the next 12 months. This high investment rate and investment percentage is likely to lead to fast losses and some serious angel regret. Note also the difference between the average ticket size of $10.000 and the maximum $100.000. We suspect this angel may get pulled into some fast deals going significantly higher than the $10.000 he first indicated.

2. Trusting the network

Our second example is aiming to see 100 deals, and only invest in 5, over the next 24 months. This sounds more like a careful, getting-started strategy. Note that this angel is mostly looking to invest in ‘great deals happening in the angel network’, clearly indicating a willingness to co-invest and work with others. Smart.

Note that this is also a founder, with a network of angel investors around her. Smart. Building the dealflow network.

3. High Volume

This high-volume, German angel aims to see around 80 deals annually, over the coming five years. That is some serious high-volume planning and would require plenty of network and deal flow to succeed. With an average ticket size of $3.000, this is also a great way of getting started relatively cheaply, with a possibility to go to $20.000 in rare cases.

Our German angel is looking to build a portfolio of up to 20 companies, mostly looking for tech companies with proven traction, early users and possibly also early customers secured. Don’t be surprised if this angel investor would want to do customer interviews as a part of his due diligence process. Equally, given his tech background, he may also roll up his sleeves and test out code as he is building his supporting role with the team.

4. High-volume, corporate climate tech champion

Our fourth angel investor recently left her corporate role in energy- and climate tech to pursue a new role in the European climate tech landscape. Her newsletter already has 25.000 readers, a valuable real estate for any founder.

She is aiming to look at 500 companies across Europe and do 5-10 deals, for a 1-2% conversion rate. Her ticket size is relatively low, at $5.000 per deal, with an upper limit of $8.000. But, her network is golden, her corporate access is great and her newsletter makes her a sought-after angel investor for climate-tech founders across Europe.

Your Turn

Now, it’s your turn.

Download My Angel Strategy Canvas and complete your own angel investing strategy.

You may want to reflect on your own deal flow, and how to expand it. Your portfolio construction and your timeline. Make sure to budget the capital to invest (note, that all capital may be lost here). Think about your role and follow-ons. Think about your investment areas. AI is hot today, but may go cold tomorrow (what are the sustainable business models here, after all?); and finally, think about your contribution to the team -if any.

Good luck with shaping your angel strategy.

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