This summer,I had the pleasure of teaching a module on venture capital value creation strategies at the Newton Venture Program at London Business school. Together with Tiffany Bain, Director, Value Creation at DFDF (Dubai Future District Fund) we explored how venture capital funds can shape a wide variety of value creation strategies. In engaging discussions with the excellent NVP cohort, we discussed personal experiences, shared insights on how to navigate challenges in value creation, and examined the strategic approaches that drive sustainable growth and success for startups in the venture capital ecosystem.
Hello, London!
The first time the program leadership at Newton Venture Program asked us to give a talk on value creation (technically, a cohort webinar), we realized we had some work to do. We were simply unable to articulate it well enough to our liking, and make it accessible for people to quickly grasp. The first webinar (2022) went well, but we wanted to do better, much better.
Thankfully, our friends at NVP were very receptive to exploring the topic in the classroom, this time equipped with our new insights, new materials and a world-class value creation practitioner, Tiffany Bain, from Dubai Future District Fund.
So, when the invite to run a module in London in the middle of Summer arrived, we were delighted to say yes.
Tiffany Bain presenting DFDF’s work on building out the VC ecosystem in the Middle East
Exploring Value Creation in Venture Capital
The background of the module was a series of ongoing interviews I had with fund managers across markets. We discussed how they approached post-investment, value creation with their portfolio companies. From PE funds in Africa, VC funds in Asia and early-stage investors, we talked about platform teams, emerging managers, small funds and large funds, and how they all have different approaches to venture capital value creation.
What emerged from that series of interviews was a profound insight into the multiple, different methods of value creation a venture capital investor can bring to the table. Both from a professional, structured way and a personal capability way, a VC investor has a rich toolbox to work with.
Following those interviews we wanted to capture this insight, leading to the creation of the GP Value Creation canvases. To make the topic even more tangible for managers, we developed the GP Value Creation Cards, a stack of 80 cards, shaped to help VCs reflect, discuss and evolve their own value creation strategies.
The 20 Levers of VC Value Creation
These 20 levers all represent different areas a venture capitalist can support their respective companies.
One Manager, at a seed-stage firm, may choose to double down on early business model iteration, go-to-market, young founder coaching and crafting a long-term capital strategy.
At another firm, investing more at Series A, the value creation process may be more aligned around extensive industry insights and expertise, building next stage financial management tools and helping out on talent and recruiting.
A late-stage fund, typically at series B or C, would be inclined to focus on growth strategy, world class board and governance, developing robust ESG and impact reporting and crafting an exit strategy.
In our research, we find no one single best practice, it is a function of fund stage, company maturity and the VC manager’s skills and personality.
Introducing the GP Value Creation Canvas
The GP Value Creation Canvas presents all 20 levers of value creation on one page – giving fund managers a full overview of where they stand in each category.
What’s your personal VC value creation playbook? Start by identifying your top levers.
From 20 Levers to 80+ Value Creation Cards
Digging deeper into our development, we identified a 1-4 scale on each of the levers, with 1 being ‘underperforming’ , 2 ‘performing’, 3 ‘overperforming’ and 4 ‘outperforming’.
Armed with this structure, we went to work to articulate a statement for each of the levers using the 1-4 scale
Exit strategy – on an underperforming to outperforming scale
In total, this structure gave us 80 unique statements, allowing any fund manager to identify strengths and weaknesses, opportunities and areas to improve.
Download the full deck of Value Creation cards with all 80 statements below
This was the toolkit and deck of cards we brought with us to London, Working in groups, the Newton Ventures participants got a chance to discuss their personal understanding of the 20 levers. They reflected on their personal value creation skillset, and finally developed their personal development path for sharpening their own, personal impact in the post-investment value creation process.
We are currently working with multiple funds to implement the new materials in ‘how we work’ and see very strong results in those early discussions.
While post-investment value creation still is an under-analyzed area in the field, we believe anyone, armed with the canvas and deck, can step up their game in just hours.
Tiffany Bain driving engaging discussions on personal impact
The VC value creation toolkit in action
Final session, presenting personal development steps on VC value creation
Newton Ventures participants engaged in deep discussions on the 20 levers of value creation
Discussing VC fundraising, board meetings and industry expertise
Post-teaching debrief above London, with a very understanding family crew
https://i2.wp.com/www.engage-innovate.com/wp-content/uploads/2026/04/gp-value-creation-cards.jpg?fit=2470%2C1647&ssl=116472470Christian Rangenhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngChristian Rangen2024-09-04 14:28:002026-04-24 14:44:51VC: Upgrade Your Value Creation Toolbox
Over the past 24 months, Strategy Tools has assisted accelerators, innovation agencies, and global founder teams in pivoting to a new funding strategy. Gone are the days of relying solely on equity financing. Today, the focus is on blended startup financing. But what is the role of accelerators in this shift, and how can your accelerator help founders succeed across the capital stack?
Eighteen months ago, startup founders were chasing equity investors, and accelerators were hosting mega-demo days. In today’s capital markets, where capital efficiency and profitability take precedence over future growth potential (with AI being an exception), startup founders need to pivot. They must adopt a blended financing structure where grants, debt, and revenue are equally important components of the financing mix.
Today, founders are expected to have the financial acumen, or the right team to support them, to understand various financing opportunities. This includes not only knowing what they are but also understanding their processes, requirements, expectations, and terms. Sifted, a subsidiary of the Financial Times reporting on Europe’s venture capital environment, recently published that European startups raised €47.3bn in equity, debt, and grant funding in the first half of 2024. A total of €18.7bn came from debt. For accelerators, this means the focus needs to be on educating founders on the available capital stack, additionally to traditional equity or convertible loans.
What is a Capital Stack?
The capital stack refers to the various sources of financing. Traditionally, founders and investors focused purely on equity financing (money for an ownership stake), or using convertible loans (or similar instruments).
The capital stack has not changed, but the relevance and use has. In 2024, c. 40% of financing in Europe came from debt – signaling a strong shift and perspective in the market. Today, the sources of proceeds can vary.
Consider that cash from revenues can be used for R&D or hiring or marketing, as well as signed commercial contracts can be used for invoice-based financing. Grants can be used to finance research or projects. All of these are non-dilutive, i.e., have no impact on the cap table which is equally beneficial to founders and investors, who both want to retain the highest stake in the company possible to maximize value.
In the “Our Capital Stack” Canvas, on the Y-Axis we cover the capital stack sources.
The capital stack refers to the hierarchy of financial claims that investors and lenders have on a company’s assets and income and the various sources of funding a company can have.
The most common sources of capital are equity (common vs preferred shares), debt financing (split into senior debt, mezzanine financing, project financing or more) and soft funding (including project based funding, grants, tax benefits, subsidies or more).
Each layer of the capital stack has different risk and return characteristics, influencing how and when investors get paid. Some, like soft funding, do not impact investors (no impact on the cap table) or credit-worthiness and are therefore an incredibly attractive method of raising capital. We should of course not forget any capital coming in from revenue or other existing contracts, like invoice-based financing.
As an accelerator, your entire team should be well versed in all of these capital sources and which would be most beneficial for your companies.
What is Blended Financing?
Blended financing involves combining different types of funding sources, such as equity, debt, grants, and revenue-based financing, to support a startup’s growth. This approach allows startups to optimize their capital structure, reduce dilution, and enhance financial flexibility.
Later on this article, we will cover three cases of how blended financing are used in some of the most successful European startups (based on amount capital raised).
Founders today need to understand how these asset classes work together and the benefits and drawbacks of each. They will look to accelerators or other members in the ecosystem to help educate them on potential alternatives, and what is most relevant for a climate-tech vs edtech vs infrastructure startup.
First-of-a-Kind (FOAK) projects often involve significant infrastructure and heavy asset investments. Understanding the unique challenges and opportunities associated with FOAK projects is crucial for structuring effective blended financing strategies. The example of Northvolt illustrates a FOAK solution as a battery plant of this size and complexity had never been built. Other examples include H2 Green Steel, Climeworks, or LanzaJet.
These projects are typically used for the development of their solution or product, demonstrating the use case on a larger scale prior to initial deployment but bear higher technical, market, and financial risks. Due to the capital-intensive nature of FOAKs, there is a “valley of death” where funding sources are limited between smaller venture capital tickets and larger debt sources (which require lower risk profiles and strong traction), which is why the importance of blended capital becomes relevant.
Governments should be considered for soft funding through grants or loans, project financing solutions through investment banks like the EIB, or equity financing from larger institutions or private equity funds.
For more insights on alternative climate asset classes, refer to this article. For more information on FOAKs, we highly recommend this article. Most recently (August 2024), the French company Ÿnsect will aim to raise a FOAK solution – read Sifted’s coverage here.
A New Landscape for Founders
Startup founders need to adapt to this evolving capital landscape. Key steps founders should take include:
Diversifying funding sources: Explore grants, debt, and revenue-based financing alongside traditional equity.
Prioritizing capital efficiency: Decide with existing and new investors whether to focus on scaling and raising funds until profitability or on achieving profitability and sustainable growth.
Understanding investor expectations: Be aware of the different risk-return profiles across the capital stack.
Building robust financial models: Demonstrate how blended financing can optimize the capital structure, considering interest payments or maturity dates for debt structures, and cap table impact for equity investments.
Engaging with alternative investors: Develop relationships with lenders and grant providers.
Accelerators should feel comfortable with all of these topics amidst a dynamic environment and tough fundraising environment.
The canvas below offers a solid starting point for visualizing various funding streams and their interoperability.
Let’s explore how the Capital Stack canvas plays out through a few case studies:
In our previous Growth Strategy post – we introduced you to the fictional company VoltyngX – an electric vehicle battery repurposing start-up. We continue working with them on the Capital Stack canvas to see what their various capital sources could be going forward:
And here are a few cases from the real world:
Case Study A – Electra
Electra, a French electric vehicle charge point operator, has raised close to €600m since its founding in 2021. Today, the company employs around 200 people across eight countries in Europe, responsible for approximately 200 live stations representing more than 1,200 charge points. Their aim is to build 2,200 charging stations and more than 15,000 charge points in Europe, a capital-intensive endeavor.
Their seed round was led by Serena, raising €15m in June 2021, followed by a €160m Series A led by Eurazeo. In January 2024, the company raised a €304m Series B led by the Dutch pension fund manager PGGM, with participation from BPI France, Eurazeo, RIVE Private Investment, and SNCF. Between their Series A and B, the company also raised around €27m in debt financing from the French bank Credit Agricole.
Case Study B – Tibber
Tibber is a Norwegian smart energy management company providing energy-efficient solutions through a smart energy app. Tibber is currently active in Norway, Sweden, Germany, and the Netherlands, where users pay a monthly fee instead of a markup on electricity prices to promote a greener and more sustainable future. Tibber is considered a ‘soonicorn’ (soon to be a unicorn) with revenues above €2bn in 2023.
Since its founding in 2015, Tibber has actively funded its journey through five equity funding rounds: a SEK7m seed round, NOK15m venture round, $12m Series A, $30m Series B, and $90m Series C. Between these transactions, Tibber also raised significant amounts in soft funding (grants), including SEK3m from Sweden and NOK13.5m from Norway. Before their Series C, they also secured €35m in debt financing from Nordea.
The best-performing companies understand the value of a blended capital stack and how utilizing all financing opportunities available to them provides value to all shareholders.
Here, we mock up what we think it will look like if TIbber were to work on the Our Capital Stack canvas:
Please note that all information in this canvas is purely illustrative. While Strategy Tools is not involved with Tibber, we admire their impressive achievements and are proud to see such innovation emerging from Norway.
Case Study C – Northvolt
Northvolt’s ambition is to supply the automotive industry with electric vehicle batteries, produced in Europe. Over six years, the company has had more than 12 funding rounds from more than 61 investors raising more than €8.7bn.
Northvolt received early funding from Vinnova, Sweden’s Innovation Agency, the Swedish Energy Agency, StenaLine, ABB, and Climate KIC. Following this, the European Investment Bank provided over €50m in debt financing. Siemens invested €10m, and Vargas Holding and Vattenfall contributed €12.5m. Within two to three years, the European Investment Bank extended an additional €350m in debt financing to support the construction of their first factory. Simultaneously, Northvolt secured $1bn from VW, Goldman Sachs, BMW, IKEA, AMF, and others. By July 2020, the company raised €1.6bn in debt financing from a consortium of over 20 banks and €600m in venture financing from 11 investors. The funding journey continued with another €600m from VW and €2.8bn from 19 investors. This case highlights the complexity of today’s funding environment and the importance of understanding various funding sources.
A Changing Role for Accelerators
Accelerators must also evolve to support this new financing paradigm. Their importance in the ecosystem cannot be understated, but they need to shift their learning towards helping founders understand the new and blended capital stack. Crucial actions for accelerators include:
Educating founders on blended financing: Provide training on various funding sources and their implications.
Fostering connections with diverse investors: Build networks with debt providers, grant agencies, and revenue-based financiers.
Redefining success metrics: Shift focus from just equity raised to overall capital efficiency and financial sustainability.
Supporting financial planning: Assist startups in creating comprehensive financial strategies that leverage blended financing.
Adapting demo days: Showcase startups’ ability to secure diverse funding sources and achieve profitability.
Below is Sifted’s calculation of the most active debt funding rounds in 2024 so far. As an accelerator, you should be able to introduce some of these players to your startups or begin building relationships to understand what they are looking for and what different requirements they have.
Ending Notes
As the capital landscape continues to evolve, both founders and accelerators must adapt to leverage blended financing effectively. By diversifying funding sources, prioritizing capital efficiency, and understanding the complexities of the capital stack, startups can navigate this new landscape successfully. Accelerators play a pivotal role in guiding founders through this transition, ensuring they are well-equipped to thrive in a blended financing environment.
https://i1.wp.com/www.engage-innovate.com/wp-content/uploads/2026/04/277194529_711e142a-4c49-4c86-a2fa-90f9d30f584a-scaled-1.jpg?fit=2560%2C2560&ssl=125602560Christian Rangenhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngChristian Rangen2024-08-19 17:05:002026-04-23 17:23:00Winning Across the Capital Stack
Startups are the engines of innovation, driving economic growth by offering advanced technologies and solutions to emerging challenges. However, in their relentless pursuit of delivering superior products and meeting customer needs, startup teams can sometimes lose sight of the bigger picture. As professionals working within an accelerator, your role is to guide these teams, helping them maintain a clear strategic vision while navigating the daily demands of their business.
One of the most effective tools we often use with our startups to address this issue is the Rocketship Canvas.
The Rocketship Canvas is a powerful framework that helps founders, investors, board members, and advisors clearly articulate and visualize the key aspects of a startup’s journey and strategy. It has proven to be highly impactful in globally renowned accelerator programs like Katapult and Hatch, where it helps teams align their goals and strategies on a single, visually accessible page.
By regularly updating and using the Rocketship Canvas, you can ensure that the startups you support stay on track and grow strategically.
Why the Rocketship Canvas?
The Rocketship Canvas addresses critical questions that are essential to a startup’s growth, such as:
How can we accelerate the company’s growth?
Where do we want to be in six, 12, and 24 months?
What does our fundraising strategy need to look like to reach these milestones?
Which investors, customers, partners, and experts should we engage to build vital relationships?
Every startup needs a dedicated advisor, manager, or board member who can hold the company accountable. This involves assessing where the startup aimed to be 12 months ago, understanding where it stands today, and envisioning where it could be in the next 12 months. The Rocketship Canvas makes this process tangible by breaking down the journey into three distinct stages, each with its own set of objectives and milestones.
Case: VoltyngX
Let’s explore how the Rocketship Canvas can be applied in a real-world scenario. Consider “VoltyngX,” a startup specializing in repurposing electric vehicle batteries into advanced battery storage solutions. After a significant breakthrough in their technology, VoltyngX is ready to scale commercially. For this exercise, we’ll use VoltyngX as an illustrative example.
Each of the three boxes in the Rocketship Canvas represents a distinct stage in the startup’s growth journey. We encourage teams to creatively ‘name’ each phase, whether it’s as simple as “Phase I” or something more descriptive like “Conquering our Local Market.” In this case, we’ve identified the stages as:
Conquering the Local Market
Expanding into Neighboring Countries
Becoming a Household Name in Europe
Adapting Key Metrics (KPIs) Over Time
As a startup evolves, so too should its key metrics. In the early stages, a startup might focus more on overall revenue or customer acquisition rather than profit margins. As growth progresses, these metrics will naturally shift. For instance, VoltyngX will need to decide whether to prioritize the number of customers, weighted pipeline, bugs resolved, churn rate, or ARPU (Average Revenue Per User) as their business scales.
Setting Targets and “Must-Wins”
Within each stage of the Rocketship Canvas, there are three primary targets that the company aims to achieve. These targets should be meaningful achievements that can be showcased to shareholders, customers, or even on platforms like LinkedIn. Often, these targets are broad and influenced by investors or the board of directors.
Achieving these targets depends on succeeding in the “Must-Wins”—specific, actionable steps that are critical to reaching your goals. For VoltyngX, this might involve hiring a CFO to lead their fundraising efforts and professionalize their internal financial processes. They might also aim to secure a local customer, land their first international customer, and develop a sales strategy that can be effectively scaled as they onboard new hires.
Estimating Revenue and Capital Needs
The final section of the Rocketship Canvas involves making an informed estimate of the revenue the startup aims to achieve by the end of the timeline and determining the capital needed to reach those goals. For VoltyngX, for example, the goal might be to generate over €200k in revenue by raising €1 million, which should sustain the startup through Q2 2025.
Continuous Planning and Adaptation
We encourage startups to spend time thoroughly mapping out their first step, ensuring it is clear and well-defined. It’s also crucial for them to engage with customers, clients, employees, investors, and advisors to gain insights that will shape the company’s journey.
As the startup plans its second and third phases, both quantitative and qualitative measures should be considered. These measurements will serve as a blueprint for a growth strategy that should be revisited and updated quarterly. This regular check-in helps ensure that the company’s progress aligns with its anticipated growth trajectory.
Beyond the Rocketship Canvas
The Rocketship Canvas sets the stage for more comprehensive strategic tools, such as the Outcome Canvas. Together, these frameworks will help the startups you support refine their strategies, positioning them as attractive options for international talent and garnering recognition from local media for their successes.
By guiding startups through the Rocketship Canvas, you’re not just helping them plan for the future—you’re setting them up to achieve sustainable, long-term success.
As long-term partners of leading accelerators worldwide, we empower startups with innovative strategies that drive real results. Our work has helped numerous startups develop stronger fundraising strategies, become investor-ready, and craft clear roadmaps to success. Want to see how we made an impact? Check out our case study with Katapult, an award winning accelerator, or reach out to us at hello@strategytools.io — we’d love to connect!
UPCOMING WEBINAR
Building Better Accelerators
From impact investing in Europe, agritech in Africa, ocean startups in Hawaii, ocean funds in Fiji or climate funds in Singapore, we have seen a number of accelerators up close and personal. From first-generation aquaculture accelerators to early-stage deep-tech accelerators, to recent GP/VC/PE accelerators, there is a constant stream of innovation in the space.
This begs the question, how are accelerators evolving? How should accelerators think about strategy, programming and their own business model? What are the latest trends a leadership team needs to think about and what role does AI play for accelerators? Has the time come for accelerators to rethink their strategy and if so, how?
We will explore these topics and more during the webinar.
https://i1.wp.com/www.engage-innovate.com/wp-content/uploads/2026/04/Rocketship-Canvas-scaled-1.jpg?fit=2560%2C1450&ssl=114502560Christian Rangenhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngChristian Rangen2024-08-09 17:30:002026-04-23 17:48:11Empowering Startups with the Rocketship Canvas: A Guide for Accelerator Teams
Imagine if there was a way you could educate, teach, train, engage and network your local angel network all at once. Well, there is. After 15 months of active pilots worldwide, we are thrilled to introduce the Strategy Tools Business Angel Masterclass. The goal? Greatly improve the growth and development of your angel network!
What is the Business Angel Masterclass?
The Business Angel Masterclass is a highly engaging, competitive, action-based Masterclass for angel investors and anyone working in the angel network’s wider ecosystem. It runs over 3 days (with a reduced option of 2 days), taking people through the entire startup journey from the idea stage, angel investments, long-term collaboration and eventually exit. The 3-day program perfectly mirrors real-life angel investing and the various decisions both founders and angel investors need to make as they go through the founder’s journey together. During the journey, participants work in both teams and networks to solve specific challenges at each stage. Problem-solution, product-market fit, financing, investor readiness, and business model, these are all challenges teams must work to overcome.
What does the program look like?
After several pilots, we have structured the 3-day program in three phases.
First, on day 1, we teach the basic building blocks of angel investing. This is a one-way, lecture format, covering all key concepts in depth. Strategy, portfolio risks, active vs. passive, investment structure (equity, convertible, SAFE), follow-on investing, downside protection, investing in networks and more. At this stage, the Angel Investor Toolkit is also provided, giving the participants a rich workbook of tools and canvases they will be using during the 3-day program.
Next, we break people into two categories (founders and angel investors) and then split them into teams. This is the beginning of the Scale Up Angel simulation, where participants are working in teams to build and scale startups. Effectively, they now need to apply the learnings we just covered that morning. Over the next 48 hours, people will be largely working in teams, interspersed with short teaching sessions on topics like startup boards, analyzing complex term sheets, structuring late-stage funding rounds, outcome analysis, growth strategy and more. As the teams compete and collaborate during days 1,2 and 3, time tends to fly very, very quickly, and a common feedback has been “Wow, where did the time go”.
At the wrap-up of the team-based format, using the simulation at lunch on day 3, we conclude much of the learning for the first 2,5 days. The final half-day session, after lunch on day 3, is spent working in small groups, on your own personal angel strategy and how to develop the angel network. Core concepts like angel network maturity, dealflow platform, deal leads and more are discussed and worked on. Closing out the final day, participants will leave with a deeper understanding of their own angel strategy, a rich toolkit to support them and a clear plan for how to develop their angel network over the coming 12-18 months.
Why we created the Business Angel Masterclass
The Business Angel Masterclass was created based on insights from angel investors, investor clubs and angel networks around the world. Meeting with innovation agencies, ministries, and ecosystem development builders, we learned that there was a clear gap in how to effectively teach and train emerging angel investors – and at the same time build the social ties and trust between old and new angels in the network. Working with a single client in Europe, we had a hypothesis that a multi-day, highly immersive learning experience, with rich case content, visual tools and working in teams would solve a lot of the challenges angel ecosystems were facing. Sure, we can all read the top-angel books, but that won’t drive much learning. Yes, we can all just get started on making first investments, but we believed an experiential learning format, mixed with rich content and details on cap tables, term sheets, shareholder agreements and late-stage financing would be a far more effective way to teach and train angel investors.
Our first pilot validated this hypothesis. Our second pilot proved our key points and our third and fourth pilots really helped us understand just how effective and impactful an immersive angel masterclass could be.
Who we created the Masterclass for (five user personas)
In developing the Masterclass, we had five unique personas in mind.
The emerging angel investors – zero investments made
The emerging angel investor will learn all the key building blocks she needs to get started. Often, it is a question of confidence and finding a network of like-minded co-investors. We have seen many of these step up and shine in the Masterclass, often leaving with a desire to get started and started quickly.
The new, but passive angel investors – 1-3 investments made
Some new angels have started making investments, they have the basic knowledge and skills, but they often lack the social network and trusted co-investors to be working with. We have found that this group thrives on the collaborative aspect and quickly identifies people they can be working and investing more actively with.
The quickly learning angel investors – 3-10 investments made
The quickly learning angel investors have made multiple investments, building a portfolio and often already started working with the founders. But, in our experience, this angel usually does not have much experience with what happens next. With a limited understanding of the next funding rounds, revenue growth, later-stage term sheets, dilution and more, this angel will often be surprised – even shocked – to learn what comes next. We think it is wise to learn this in a Masterclass, not in real life.
The ecosystem builder
To our surprise, we have found many ecosystem builders benefitting greatly from the angel masterclasses. Innovation agencies, government officials, incubator managers, bankers and more, these people may not invest their own money (at this stage), but they are hugely important to the development of local and national angel networks, and as such, truly benefit from the learning experience.
The angel network champions and leaders
Finally, our core user persona is the handful of angel network champions, leaders and builders. These are the people that actually drive the development, formation and expansion of the angel network. They secure financing from public sources and sponsors. They bring in the startup deals. They host the events. They plan for training sessions. In short, they are the battery that powers the machine. We have found these to love the engaging nature of the Masterclass, and seeing huge short- and long-term benefit from the Masterclass.
Why angel networks should pay attention
Having worked with and taught at angel networks globally, we have seen first-hand how angel networks onboard, upskill and develop their members. We firmly believe that angel networks can greatly benefit from running Business Angel Masterclasses, both teaching and training but also building the social fabric of the network, leading to more active co-investments in the future. In short, angel networks can benefit significantly from running the Business Angel Masterclass.
What angel investors will take away from the Masterclass
For angel investors, the experience will quickly and clearly teach a few core concepts:
Deal flow and assessment (how to review deals)
Portfolio construction and investments (how to make investments)
Working alone or working with others (the benefits of investing in networks)
Understanding pre- and post-money valuation (price per share, round structures)
Mark-ups, follow-on rounds and dilution (what happens post your investment)
Cap table management (the importance of keeping things clean and updated)
The impact of advisor shares, ESOPs, incentive programs
Easy and complex term sheets, and how they impact the company and your angel investment
The risks associated with preference shares and liquidation preferences
Understanding dilution vs. value increase over multiple rounds
Understanding exits and how liquidity is generated back to angel investors
Very advanced angels will most likely already have seen most of these concepts in practice. Still, for the large majority of angel investors and anyone who got started investing within the last 3-4 years, it is very unlikely they have seen all of these things in practice already. The Masterclass experience allows them to work through term sheets, master cap table math, understand dilution and better position them to coach founders on these issues.
Next location, MENA
We are honoured to have been able to run a number of Business Angel Masterclasses around the world already, constantly testing out and iterating on content, exercises and group work. Next month we will be back in the thriving MENA region to run our next Scale Up Angel Masterclass. Here, we expect to meet 40+ engaged, energized and active angel investors, all striving to become better angels, for both ecosystem impact and financial returns.
Looking ahead
Looking ahead, over the next 24 months, we aim to deliver 10+ Scale Up Angel Masterclasses globally. Places like Canada, Denmark, The Gulf States, Panama, Singapore, UAE and Eastern Europe have all expressed significant interest to host and run the Masterclass. Despite having very different starting points, their desired outcomes are all the same, boosting the local and national angel investor ecosystem. If successful, that should help us accelerate and energize 300 – 600 angel investors globally, in turn impacting 1000’s of startup founders with a renewed insight and expertise.
https://i0.wp.com/www.engage-innovate.com/wp-content/uploads/2026/04/IMG_4535-scaled-1.jpeg?fit=2560%2C1920&ssl=119202560Christian Rangenhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngChristian Rangen2024-08-06 17:54:002026-04-23 18:01:18Introducing the Business Angel Masterclass
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.
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.
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.
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.
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.
In our work with angel investors, angel networks and startup ecosystems around the world we find eight uniquely different angel investor types. From Cairo to London, Palo Alto to Zurich, these angel types all show up, looking to invest, support and contribute; but first, they need to know which type of angel they are.
Understanding the business angel universe
Globally, there are 100’000’s of angels and 1000’s of angel networks. From Nairobi Angels (Kenya), Sand Hill Angels (California), Connect BAN (Norway), Dubai Angels (Dubai) EBAN (European), Doha Tech Angels (Doha), INSEAD Asia Angels (HK/Singapore), AfBan (Africa), SICTIC (Switzerland) these angel networks are critical, vital backbones in any tech ecosystem. From first financing, first coaching, early mentorship, early board roles and introductions to customers, employees and investors, angel networks serve as a vital glue in both mature and emerging ecosystems.
Yet, across these business angel universes, there are many different roles angels can take on.
Based on our work with 100’s and 100’s of angel investors and angel networks globally, through Masterclasses, online programs and ecosystem development, we started looking for similarities, telltale signs, angel personas and profiles. Over time, we identified five, six, later seven and eight different angel types. With Rick located in the heart of Silicon Valley, but also advising global startup ecosystems from Korea to Canada, Brazil to UAE (fun fact, while writing this, Rick is in Brazil teaching a week-long program on startup ecosystems), and Chris residing in the Nordics, but supporting angel networks, innovation agencies and governments in the Middle East, North America, SE Asia, Europe and Africa; we collectively see a vast number of angel types and angel networks around the world.
Based on these early personas, we then sketched out a simple 2 x 2, with ‘Value the angel investor brings’ on the Y-axis and the ‘value creation the angel investor brings to the startup’ on the X-axis. Naturally, different angels will bring different levels of value and support, but we quickly found a significant difference among the angel types.
Once identified, and sketched out, we labelled this visual construct the Business Angel Universe Map. Our goal; visually map out the different types of angel investors we were seeing and help the larger ecosystem make sense of it, grow and develop. Ultimately, we hope, this may lead to better angel networks and better angel investors around the world.
Having used the Business Angel Universe Map over the past 10 months, we find six primary use cases for it.
Self-assess Where would you place yourself?
Self-develop Where would you like to develop as an angel investor?
Map the angel network What does your current angel network look like?
Develop the angel network (this is the big one, we find)
How and where would we like to develop the angel network
Best practices What does ‘great angel investing’ actually look like?
Educate Educate aspiring angels, active angels, students, entrepreneurs and the larger ecosystem; not all angels are created equal, and just like you know the difference between a pre-seed and Series B investor (at least, you should), you also know the difference between a dipping Toes angel and a Value Creator angel.
What is an angel investor?
Before we proceed, it may be useful to define what is, actually, an angel investor.
In our view, and by most accounts, an angel investor can be best described as a:
Individual investing in early-stage companies, exchanging cash for equity ownership
Investing her or his personal wealth, not investing on behalf of anyone else
An angel investor will typically invest between $10.000 to $250.000, but sometimes as little as $1000, to get started
Often taking an active role in supporting, coaching, and mentoring the startup(s) in the early days of the founder’s journey
Often holding a full-time job, often in banking, consulting, investments or startup founder, with the investments being a (small) part-time activity outside of work
May be retired. With a bit of discretionary funds and time on their hands.
In some cases doing angel investing full-time, often as a successfully exited founder or retired consultant, banker, or executive. Thinking about formalizing into a small fund.
Very often involved in local or national angel networks, for deal flow, co-investments and follow-on investments
Globally, angels are recognized as supplying ca. 90% of all early-stage financing
Globally, we estimate there are between 1 million – 1,5 million active angel investors
The Investment Process
DEAL FLOW
Looking for investments or having investments look for you. Maybe you want to see as many deals as possible, or simply take those that are referred to you by friends or colleagues.
INVESTING
Investing in a startup. This can be done via any one of a number of vehicles. First-time starters will typically use a SAFE agreement or Promissory Note. The same agreements can be found online. If you’re part of an angel group, there will be plenty of help available.
ADDING VALUE
Some angels are passive. Invest and forget. Others are very active, trying to help the company get to the next steps by advising, mentoring, coaching and more. An angel investor will rarely become part of the board but it does happen.
DRIVING TO EXIT
Normally this is the purview of later-stage, professional, venture capital investors and/or board members but a strong, well-networked angel investor can play a role and potentially reap the benefits.
Deep dive into the eight angel investor types
While a generic definition of angel investors is useful, we believe you need to get the far more granular and nuanced view to truly understand the different angel roles.
DIPPING TOES
A Dipping Toes angel will often say they are here to learn. They are just taking their first steps as an angel investor. Angel investors in this category may have recently sold a business or saved up some money for early-stage investing. They are primarily looking to learn. This can be a great starting point for any angel investor, looking to build skills over time.
Joining an angel network is a good way to get started. You will be able to see deals, and get advice from peers, others will be there to help with due diligence and the form of investment will likely be set for you. You will learn a lot in a short period of time.
Beware of getting overly excited too early, allocating too much money too quickly (splurge) or over-allocating into a single company (concentration risk). Our recommendation to Dipping Toes is to see at least 100 deals before making a single investment. As you probably can imagine, this never happens…..
SPRAY & PRAY
The Spray & Pray angel is quite common in growing ecosystems. There may have been some wildly successful angel investments in the ecosystem, and people are looking to ‘get luck fast’. A Spray & Pray angel understands it is all about building an angel portfolio, possibly needing 50-100 investments to have a good shot at significant returns.
Yet, the Spray & Pray often happens without much plan, discipline or portfolio construction.
If you’re part of an angel group, perhaps you are the person who says “yes” more often than not. It’s OK, you’re playing the odds. In our experience, this angel type is mostly focused, even excited, about making the investments (cash out), but has limited attention on what follows next (follow-ons) and how to generate exits (cash back).
WEALTHY ANGEL
We have met many wealthy angels. They might have made their respective fortunes in real estate development, holding a C-level position or even inherited the capital. What they have in common is that they have more capital than experience as an angel.
As such, they might come in a take large positions (20% – 50% equity stake), drive up valuations and generally shift the local market for early-stage investments, yet not always in a good way. We have seen ample examples of a wealthy angel, with the best of intentions taking an exuberant ownership stake in the first round, without understanding the founders’ journey and the need to develop a long-term capital strategy.
Typically not part of an angel group. No real desire to share the company with other, smaller, less sophisticated investors.
On the flip side, any founder able to catch a wealthy angel knows they likely have first-hand access to further follow-on financing, effectively cornering the angel to keep investing and not lose their investment. Of course, the flip side to that again, is that founders quickly get overly diluted by doing this.
We have seen many wealthy angels quickly grasp angel investing, and ‘stepping up’ in their active angel roles over time.
ANGEL PARTICIPANT
The angel participant can be described as the most innocent, supportive and naïve player in the angel universe. As a participant, this angel is just happy to invest, to join rounds and get some deals done. Will often rely on angel networks and club deals. Will rarely spend any significant time with founders, boards or due diligence.
An angel participant may also be a more experienced operator, executive or investor, but choosing to sit in the back of the bus, to join rounds, but without the hassle of getting involved.
We believe the more passive angel participant is important and very welcome, but would also recommend this investor type to develop a strong, trusted network of co-investors who can lead the due diligence and get deals done. Angel group perhaps?
These first four types can best be described as somewhat new or passive in angel investing. They may be here to learn, to get deals done and to get investments completed, but they bring somewhat limited value and network to the startups. Equally, they are likely to spend less time in the role of an angel investor.
The following four types, however, are different. All four are more active, more experienced and bring vastly more value to their investments.
STRATEGIC NETWORKER
The Strategic Networker Angel is using all her might to connect, support and network the founders. She may be more selective on making investments, often asking “Can I bring these founders into my network of trusted relationships?”; but when she does, she is able to open doors, get access to clients, secure follow-on investors and generally use her network to the fullest.
What clearly separates her from the previous angel investors, is her ability to proactively lean into the deal and guide founders through tight-knit networks and relationships. Often, she will say things like “I want to bring you into the CXO of this large company, to discuss a possible M&A” , or “I want to set up a dinner with a former executive to discuss taking a board seat with you”.
The downside to the Strategic Networker is usually the capacity and sufficient time to work with too many founders.
ANGEL LEAD
The Angel Lead is a very different role from the previous five. This angel is often in charge of structuring rounds and bringing a large number of angels together in the same round.
The Angel Lead acts as the point of contact, due diligence manager and overall deal manager between a larger angel group and the founders. An Angel Lead may be part-time or full-time employed by the angel network, or at a minimum partially compensated for the work performed on getting deals done.
A solid Angel Lead will be able to establish a streamlined work process, efficiently providing angels access to documents, while easily handling term sheets, investment proposals and closing documents, including signature and payments, in some cases handling 20 to 50 angels in the same deal.
In our work with angel networks, we view the Angel Lead as one of the absolutely most important pieces to any angel network. If your angel network do not have 1-2 clearly defined Angel Leads, that should be a key priority for the coming year. In our Angel Masterclasses, we cover the role of Angel Leads in-depth, as a key success factor to any angel ecosystem.
VALUE CREATOR
The first time I (Chris), met a Value Creator Angel he said “You know, before I make any angel investments, I take the deck and go talk to all my VC friends. I ask them two questions. 1. How likely are you to invest in this founder, and 2. What do you need to see from this startup to make an investment (traction metrics)? Then I go back and make my decision to invest or not”. With a track record of 7X DPI (cash paid back), Marc has built himself into a true Value Creator angel investor.
A Value Creator angel investor works almost as an early-stage venture capital firm. Strategy, processes, portfolio development and value creation; the tools we find these angels use are almost identical to any early-stage VC firm.
The Value Creators we have met are often ex-founders. They understand the journey and the challenges. They understand the importance of getting the next 3-4 financing rounds right. They work tirelessly on building exit networks, exit options and exit partners.
A superb Value Creator can seemingly ‘create magic’ by doing deals and getting deals done.
In many of the emerging ecosystems we work with, there simply aren’t a lot of Value Creators, due to the limited number of exits and repeat founders in the market. Due to this, angel networks should consider developing a more ‘elite’ cohort of advanced angels, with the ability to ‘step up and lead’, beyond the skills and impact of regular angel investors.
SUPER ANGEL
The final type is what we call the Super Angel. In our experience, every market may only hold a single Super Angel. The Super Angel sits head and shoulders above the majority of angels, but at the same time works to include others, build the network and expand the ecosystem.
A Super Angel can take a very active role with the startup (as an investor, mentor, not necessarily as a board member), and guide the company through the next 3-5 years of growth. The Super Angel also brings a vast, unparalleled network of follow-on investors and exit candidates. Sometimes, the Super Angel may act as an official scout of a larger VC firm (Scout Program), but many Super Angels may also decline that invitation, as they are perfectly capable of investing and doing a large number of deals by themselves.
What separates the Value Creator and Super Angel is the reach of their networks (access to talent globally) and their overview of the market, from dealflow, and follow-on to exits.
Notable examples of Super Angels include Ron Conway, who defined the term, ex-Googler Chris Sacca (and later founder of Lower Carbon Capital), Swiss Angel of the Year, Thomas Dübendorfer, with 9 startups founded, founder of SICTIC (now on its 130th investor day) and author of the Swiss Angel Handbook and former McKinsey Partner, Trond Riiber Knudsen (and more recently active GP in funds like Katapult and Antler).
In our work, we point to the uniqueness of the Super Angel and recommend ecosystems to develop ramp-up programs to get more founders (Thomas), engineers (Chris) or advisors (Trond) to step up into the Super Angel roles.
Eight types, which one are you?
With these eight types mapped out, the next question is, which one are you? From Dipping Toes to Super Angel, you should be able to recognize your current profile.
Perhaps, more importantly, which are you striving to grow into? Looking ahead, which is the type of angel investor you want to be?
Pulling it all together
With over 50 years of collective experience working with angel investors, we have seen the good, the bad, the shady and the impressive. Fully recognizing that successful angel investing requires access to a strong deal flow pipeline of founder talent, combined with a rich ecosystem of customers, partners, follow-on investors, board talent, M&As, secondaries and various exit opportunities; being a great angel investor is not (just) about doing the deal. It is just as much to be the active partner in year zero, year one and year two. All angels start somewhere, but growing into the roles as Angel Lead, Value Creator or Super Angel is the result of years of work, supporting founders, structuring deals, managing cap tables, and balancing power dynamics between capital holders and founders that build the future.
For angel networks, angel investors, innovation agencies and anyone with a keen interest in angel investing, we hope that the Business Angel Universe Map can serve as a useful tool, a guide to developing both your personal angel skills as well as your larger angel investor network. Angel investors and angel networks make up a critical part of any startup ecosystem – and we hope to see many more successful angel investors in the future.
https://i0.wp.com/www.engage-innovate.com/wp-content/uploads/2026/04/8-types-of-angel-investors.png?fit=3697%2C2100&ssl=121003697Christian Rangenhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngChristian Rangen2024-07-02 14:10:002026-04-24 14:10:42The Eight Angel Investor Types: Which One Are You?
Recently, we have dug into the questions on working capital for emerging VC and PE fund managers. What we found surprised us. Turns out, there are many more options available than most fund managers think about. Here are the 12 categories you can use to fund your next VC or PE firm.
Most VC & PE firms have the classic 2& 20 business model. 2 % management fee on capital and 20% carried interest on proceeds above the target threshold. On the surface, this is the industry standard. But, for many firms, both smaller funds and emerging fund managers, this business model does not work well. Either the assets under management is too small to carry the full operating cost or the fund has yet to get to the infamous first close, upon which time the fund managers can start doing capital calls and pulling down management fee to fund themselves.
Over the past years I’ve worked with more than 250 such VC/PE funds around the world, everything from year-long relationships to one-day teaching sessions. Notably, I’ve had the chance to work very closely with 28 funds to date through the 2X Ignite GP Sprint, a 6-month emerging fund manager accelerator, for funds investing with a gender-lens. The large majority of these 250 funds all point to the challenge of working capital. “How do we fund the operations, the hiring, the fund raising, the day to day, before we reach first and final closes?”
More recently, this question has kept coming up in coaching sessions, workshop and masterclasses, increasingly prevalent. Speaking with all these talented managers, we started realizing two things.
1. Solving for working capital challenges is a task that needs much more attention
2. Already, there are many – and many creative – ways of solving this challenge
So, a few weeks ago, we went to work, starting to interview experts in the field and fund managers building new VC and PE funds as we speak.
What we found surprised us. There are actually many more ways to fund your GP working capital than we had first expected and anticipated.
Here is what we found
12 categories and 35 ways to fund your GP Working Capital
We identified 12 unique categories of working capital, some of them industry standard and obvious. Others, far more exotic an creative. Next, we identified a total of 35 different ways to fund the working capital. No single firm would ever want to use all 35 ways, in fact some of them would effectively block or prevent each other. But we did find that most firms did in fact combine many of these, frequently putting 5-,6-,7- or 8 ways together for a patchwork of GP financing.
Of course, for larger, established firms with large AUMs and long operating track record, this maybe won’t be necessary, but for emerging managers and smaller funds, a patchwork of funding options are indeed required. yet, we do suspect that even larger firms, as they grow their AUMs, will continue to deploy a patchwork approach, simply because it allows them to fund more people and run more services, activities, research and platform support for their portfolio companies.
Here’s how to fund your GP working capital
1. GP Cash & Credit Cards
2. Grants
3. Loans
4. Equity Investors
5. Sponsors
6. Program Fees
7. Convertible Structures
8. Creative Fund Economics
9. Deal Fees
10. Deal Advisory
11. Operating Roles
12. Consulting
Note, some of these will be frowned upon, some may even be prevented by the legal setup in the LPA (Limited Partner Agreement), but each of these have been found in the GP/expert interviews recently.
Introducing the GP Working Capital Map
To make it easier for people working in the field, from GPs, LPs, faculty or anyone interested in the topic, we created a dedicated Strategy Tools Canvas – the GP working capital map (part of the 100+ Strategy Tools VC Canvas Series). Download the GP working capital map here.
GP Working Capital Map, Chris Rangen/Strategy Tools, 2024
Zooming in on the 35 detailed ways
1. GP Cash & Credit Cards
Of course, the easiest way would simply be for the participants in the GP, the Partners of the fund, to pay for this themselves, out of their own pockets. Most do, for the initial setup, but quickly realize their personal savings will run out far faster than they will reach first close on the fund.
1.1 GP Initial Funding
GPs put in the initial cash, for setting up the firm and basic legal structure. Amounts can vary from $50.000 to $1M, or more. Many managers seem to have
1.2 GP Commitment
Meeting the GP commitment is a function of % and the fund size. While this capital is dedicated for investment purposes, it can be creatively cycled through the system and used for covering (large parts of) working capital. See point 8, Creative Fund Economics.
1.3 GP Loan
My good friend Rick Rasmussen once said, “every fund manager, at some point, will need to loan money into the firm to get it off the ground”. A GP loan is a short-term, personal loan from the partners into the operating side of the business.
1.4 GP equity investment
As the firm grows in size, more capital may be needed. In those cases, the partners can do an equity investment into the firm, simply adding more capital, like you would in funding any operating business. This can cause some issues, if the partners have very uneven access to capital here.
2. Grants
In many parts of the world, grants for emerging fund managers are available in the market. Receiving a grant may require a highly competitive application process, but the option is out there.
2.1 Local Grants
Local grants are often tied to very specific, local ecosystem initiatives.
2.2 National Grants
National, or federal grants usually sit within a larger, national VC ecosystem strategy. “We seek to triple the size of our VC industry, and this is one of our key federal tools to making that happen”.
2.3 International Grants
International grants are typically funded by large international organizations like Ikea Foundation, KfW, VISA Foundation and Mastercard Foundationand similar. Also known as (one form of) catalytic capital or (one form of) technical assistance, an international grant can be a big boost for an emerging fund manager.
KfW Capital offering numerous investment programs
2.4 Repayable Grants
Conditionally repayable grants are grants, to be paid back only in the case of a successful first or final close. Provided by multiple agencies, foundations, DFIs, funds and projects, like the SDG Impact Finance Initiative, repayable grants can be a key funding source for emerging managers.
3. Loans
Loans can be tricky structures to work with for fund managers. In some cases, any loan facility may be heavily regulated in the LPA. Yet, loans are both common and quite easily accessible for fund managers.
3.1 High-risk Loans
From local lenders to high-interest banks, there are multiple potions for high-risk, high-interest loans. Yet, these options come at a high cost and may not be very attractive to most firms.
3.2 Bank Loans
Most banks are not familiar with the economics of a GP structure. Most likely, your bank is not comfortable providing loans to your GP. But, we have seen several examples of VC ecosystem connected banks and financial institutions providing working capital loans to GPs.
3.3 Convertible Loans
Convertible loans are most likely to be provided by personal connections, angel networks and High-net worth individuals, possibly also family offices. See also point 7 below.
4. Equity Investors
Often frowned upon from DFIs, bringing in strategic, equity investors can be a great way to fund the early years of a new investment firm. At later stages, when successful firms have grown large, seeking a public listing is a great way to attain liquidity, secure capital and overall grow the firm. For most emerging managers, seeking equity investors for fund I, II or III can be challenging, but far from impossible.
4.1 Equity investors into the top companies (in the structure)
A successful firm may be able to attract supportive, strategic investors to buy into the top company in the structure. PE giant HitecVision has numerous very happy investors, having backed the firm (not the funds) in the early days of building the company. Similarly, the world’s most active investor, Antler, has also raised money from outside investors for operating and building out the early days of Antler.
4.2 Significant anchor investor
UK-based Thema, founded by seasoned GP/LPs Sam Ettelaie (ex-British Business Bank) and George Askew (founder-turned-VC) are seeking to be the first ticket in with first time fund. Thema can bring £5M in LP funding and provide a wealth of expertise, network and fund setup experience. In return, Thema takes 15% – 20% stake in the management company, effectively acting as a significant anchor investor (with a pre-arranged option for the GP to buy out Thema at some point).
Thema founders Sam and George.
5. Sponsors
Sponsors are unlikely to directly sponsor the fund or the management company, but the right sponsors can fund specific events, conferences, reports or research. An entrepreneurial firm will be able to integrate these elements into the platform (overall service offering of the firm).
5.1 Events
Fireside chats, exclusive meetups, high-powered CEO forums; corporate partners, law firms, placement agents, financial advisors and banks are often willing to sponsor events aimed at the right audiences.
5.2 Conferences
Lithuania climate tech vc firm Contrarian Ventures is widely known for their working building and running the Energy Tech Summit. Held in Bilbao, the event is one of Europe’s leading climate tech conferences (and so much more than just a conference). Energy Tech Summit is a large part of the platform – and funding – at CV.
5.3 Reports
In December 2023 African climate tech accelerator, Catalyst Fund, published the report, Investing in Climate Tech Innovation in Africa. The insightful,51-page report was supported by FSD Africa, UK International Development, UNIDO, GEF, and JPMorgan Chase.
Catalyst Fund’s Investing in Climate Tech Innovation in Africa report
5.4 Research
Dubai-based Global Ventures has published a number of research-reports on key sectors in the UAE. From fintech to Healthtech, energy and agritech, these thoughtful research documents are prime for one or more strategic partner to sponsor.
6. Program Fees
While off limits for some, running startup support programs is a core part of the value-add for many early-stage funds. From standard accelerator models, scale up programs, founder circles, to more rare paid angel networks and education programs, the category offers multiple interesting financing options for the entrepreneurial-minded GPs.
6.1 Accelerator Program
One of the most tried and tested funding models in this space, the accelerator program allows early-stage funds to invest, for example $150.000 or $250.000 for 7% equity, and then recoup 25% – 50% of that investment in program fee, paying for the accelerator team and mentor network it brings. Globally, 1000’s and 1000’s of startups go through this model every year, in the process allowing emerging fund managers to build more sustainable operating models. Notable examples include 500, Y combinator, impact accelerator Katapult and Hatch BlueAquaculture accelerator.
Katapult Africa Accelerator
6.2 Scale Up Program, ecosystem building programs, ocean MBAs, corporate innovation services, emerging fund manager programs
Following the accelerator model, scale up programs are more customized, oriented towards more later stage growth companies and are typically shorter in duration. These programs, with the right level of quality and relevance, can be a core part of a GP platform offering, and a successful paid service for companies. Some firms also explore ecosystem building programs and corporate innovation services. While legally and organizationally separated from the fund, these corporate innovation services form a key part of a firm’s larger platform.
One such example is Hatch Blue, the global aquaculture accelerator. Now operating three legs of its business model, Hatch runs multiple (3) early-stage funds, multiple aquaculture development programs in places like Hawaii, Singapore and Ireland, while also offering aquaculture innovation services to global clients (disclaimer, I’ve been a friend, fan and paid advisor to Hatch since inception). Many emerging managers could learn from following Hatch’s entreprenurial growth model in pursuit of their sustainable VC business model.
Another example, on the horizon, is the rise of VC-led GP programs. We are starting to see a number of GP training and development program, including GP accelerator programs, led by other VC funds. One interesting example is Speedinvest working with emerging micro funds, where they added 17 new micro funds in 2023alone. We expect this number to continue to grow into 2025-2026. While still early days, this is yet another way of offering programs at the GP level.
New micro funds in the Speedinvest family, 2023 vintage
6.3 Angel Network
As they have grown from an $11,5M fund I, into significantly larger funds II and III, Hustle Fund has kept adding sources of revenue to finance the platform. Hustle Fund Angel Squadis one such example. Today counting 1500+ members, with a goal of 10.000 members, the Hustle Fund Angel Squad members pay an annual or quarterly fee to be a part of the squad, enjoy the dealflow, co-investing opportunity, learning and network it brings.
Invest as little as $1000 with the Hustle Fund Angel Squad
6.4 Education
In recent year, 500 Global has stepped into education in a big way. Today, 500 Educationoffers a wide range of programs for VC education, led by a full-time team of five people and delivered by 500’s global experts, programs are delivered on Silicon Valley, in Egypt, Saudi Arabia, Japan, Canada and online. Education serves multiple purposes to build the 500 brand, develop dealflow, educate more future co-investors and drive revenue to the firm.
500, from accelerator to VC educator globally
7. Convertible Structures
We believe there are multiple, different convertible structures being used to fund emerging fund managers. We have heard some great stories on how they have been structured and used successfully in both PE and VC firms.
7.1 Convertible loan into the GP, will roll into an LP position at final close
One significant PE fund described how they had pooled a large number of business angels, invited them to invest into a GP convertible loan, and then planning to roll it into the fund as an LP position at final close. This would allow the GP to access the capital early, for working capital purpose, then effectively pay it back at closing, via final close capital from other LPs, and then roll that capital into the fund, on behalf of the angel syndicate.
8. Creative Fund Economics
Just like the name implies, creative fund economics may not always be popular with all LPs (notably, institutional LPs), but, within the boundaries of a qualified LPA (Limited Partners Agreement), there are numerous (more or less) creative ways a GP can fund things beyond the standard 2/20 & capital call schedule.
Everyone loves a good LPA. Read the full thing at ILPA’s website.
8.1 Sign on fee
In rare cases, we have seen an initial, one-time sign on fee, for LPs into the fund. The fee can range from 0,2% up to 2% of committed capital for the LP. This is typically applied to smaller LPs, under a certain commitment amount.
8.2 Front-Load Management Fees
While most funds follow a 2&20 model, more than 50% of all funds change the 2% structure during the lifetime of the fund. UK-based SuperSeedVenture Fund has a “2-2.5% per annum for 5 years. 3 years paid up front on subscription. 2 years paid by Investor on exit” -model. Other funds have up to 3% for the first 5 years, then declining to 1% afterwards. Overall, most LPs seem quite accepting of higher-at-first-then-declining-afterwards-management fees.
8.3 Management Fees (Standard)
Industry standard, 2% management fee is well-known. But 2% of what? Different funds apply this differently. 2% of committed capital? 2% of called capital, 2% of invested capital or 2% of NAV? The decision here will lead to vastly different actual fees on the fund. According to finance Professor Filippo Ippolito, the average lifetime fees on a VC fund comes out at 21,38% Clearly, some room for flexibility here for GPs, just stay within the boundaries of the LPA. Also worth noticing, according to Carta, between 30% – 40% of all funds are able to claim above the 2% management fee, with up to 5% able to secure over 3% management fee.
Carta data on fund’s management fee
8.4 One Time, Startup Cost
Some funds apply a one-time, initial startup cost to the fund, to cover the initial setup. This would typically cover legal costs, regulatory cost and similar. This one-time startup costs would be charged to the fund.
8.5 Fund Cost
Our friends at VC Lab offer a good overviewof what counts as fund cost (expensed to the fund) and what counts as management fee. Interestingly, most emerging fund managers seem to not have a clear understanding of how the economics here, missing out on vital details how costs are split between the manager and the fund. While it may be possible, according to the fund’s LPA, to assign expenses to the fund, forward-thinking GPs will work hard to keep these costs to a bare minimum, possibly even cover them out of the management fee. Any cost taken by the fund, will reduce available investment capital, and raising the return barrier to return the target multiple back to the LPs
8.6 GP Commit, Recycled
Connecting back to point 1.2 above, the GP can pay in the GP commit, and use this capital quite flexibly until the fund is fully deployed. This paid in GP commit acts as the most flexible capital in the fund’s capital stack, and can be recycled for various purposes, until the final close of the fund, at which time the full GP commitment must be met. Again, we would always refer back to the LPA.
8.7 Deferred payments?
It has been suggested that deferring payments with service providers, like law firms, accounting firms and fund administrator funds might be yet another way of shaping your GP business model. While we recommend all GPs to negotiate the best possible payment terms, we are uncertain whether this counts as a business model. Happy to hear your thoughts in the comments below.
9. Deal Fees
Deal fees came up repeatedly in our interviews. While detested by (most) founders, it is a legit method for (most) funds to fairly share costs with the companies they end up investing in. In certain cases, GPs can also charge deal fees to fellow co-investors, further offsetting their own costs on the deal. Mountside Ventures founder Jonathan Hollis discusses deal fees in his “Unpopular opinion – deal fees should not be contentious” article.
9.1 Legal, DD, ESG, Impact deal cost recovered
While not large amounts, some firms will specify in the term sheet, that the company receiving the capital would also bear the cost of the due diligence and legal review. More recently, we have also started seeing funds charging the costs of the ESG and impact assessment. The standard is to cover direct costs, incurred by external providers, like a law firm, accounting firm or impact assessment firm. Saastr Founder Jason Lemkinbelievesthis should be industry standard.
9.2 Deal Fees from Startup / SME
Building on the previous item, we have seen a limited number of funds charging a deal fee to the company receiving the investment. This could be a 0,5% – 2% fee for the work incurred by the deal team, especially in circumstances of extensive due diligence. In these cases, the fee structure should always be clarified in advance, in the initial term sheet, as described by the team at Zive. 9.3 Deal Fees from Co-investors “Fees are all over the map”, says Andrew Bernstein, Head of Private Equity at Capital Dynamics, referring to how GPs work with co-investors on deals they lead. Bernsteins views are similar to what we found, where fees to co-investors range from zero, to upfront fees, deal intro fees, DD fees, success fees and more. “Fees chargeable is very much opportunity dependent”, says Neda Vakilian, Partner at Actis. Ultimately, the fees charged co-investors on a deal comes down to one thing; strength of bargaining position.
10. Deal Advisory
The border line between deal fees and deal advisory can be slim. But a successful GP can combine investment work with deal advisory, increasingly becoming a trusted partner to existing LPs or co-investors. This is especially relevant in emerging markets, like Africa, where international investors may want to consider partnering and relying on local expertise to assess and advice on the deal.
10.1 Advisory on Deals From LPs/Co-Investors
Entrepreneurial-minded GPs might want to consider setting up a deal advisory service for both LPs, future LPs and co-investors, effectively operating as an investment advisor in the same sector as the GP also invests in. While this may be complicating or even distracting for the GP; it could also greatly strengthen the position and relationship between the GP and the clients, while also bringing in some sorely needed fees.
11. Operating Roles
An investment firm will take from 0,1% to 100% equity in the company it invests it, leading to wildly different relationships and expectations on operating roles. But most GPs can bring valuable, operating expertise to the table for the portfolio companies. Stepping into a portfolio company operating role, as part-time CFO, flexible CTO or even fractional CEO should not be discounted by GPs for limited time periods. We find both operating roles and board seats having the possibility to fund the GP team, and should be considered by emerging managers.
11.1 GP Members Take Part-Time, Full-Time Operating Roles with Portfolio Companies
While not common in VC, we see multiple examples of GPs taking paid full-time or part-time management and operations roles with the portfolio companies . The concept of fractional CXO has been on therise lately, and VC/PE firms can apply both fractional or interim management during various stages of the company’s lifespan. While normally understood to be outside executive, is it fully accepted that the operating role can be filled from the investment firm. In fact, this is the role of many GP operating partners in both PE and increasinglyalso in VC.
11.2 Paid Board Seats
While many LPAs regulate that GPs will not charge board fees from portfolio companies, a GP can structure this in a way that enables the firm’s representatives to charge market-standard board fees for portfolio companies. Assuming a partner holds 3-6 board seats, this might sum up to cover a significant part of her salary with the firm. The partner’s salary from the firm would then be adjusted in line with the board seats.
12. Consulting
By far the most common way of funding the GP that we found was the consulting practice or consulting work happening on the outside of the fund’s legal structure. From investment advice to strategy advisory, maybe as many as 50% of the emerging managers we’ve spoken with refer to some kind of consulting practice on the side, helping fund the transition period into full-time investing (and a sustainable GP business model).
12.1 Outside Consulting Work, Disconnected From the Fund
While having the possibility of bringing in good money, most see the outside consulting work as a major distraction from the focus on the fund. Equally, many LPs will frown if key personas are spending a significant amount of time running a consulting practice on the side. Realistically, many emerging managers have this as the ‘shortest route to stable income’ while building their first fund, but we believe there are multiple better revenue options to pursue, to better focus on the fund.
Want more? Go for merch!
While we believe these 12 categories cover 98% of all working capital options, we want to acknowledge the impressive rise of Hustle Fund merch available. From “be nice, make billions” mugs ($16M), toddler-sized “Eat, Sleep, Hustle” ($21) and the XXXL Hustle Fund Hoodie ($40), Hustle Fund’s online merch store counts more than 200+ items, with the potential to drive some serious revenue for the fund. Want to get inspired? Check out the store.
Get your merch, fund a VC
Available in all colors, sized and design. Join the Hustle Fund Squad with your latest outfit
Find your GP (working capital) business model
Working capital is a genuine challenge for emerging fund managers around the world. Much focus has been on providing new working capital facilities. While more capital surely would be beneficial, maybe a good starting point is to explore these 12 categories and design your unique GP business model? One thing is certain, for most emerging fund managers, it is likely to be a creative patchwork of different ways, put together to make your own, unique VC/PE business model.
Want to learn more?
Explore our upcoming VC Masterclasses in places like Luxembourg, Dubai, South Africa, London and online. Get in touch at Christian@strategytools.io
https://i2.wp.com/www.engage-innovate.com/wp-content/uploads/2024/06/1717890186942.png?fit=1280%2C720&ssl=17201280Christian Rangenhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngChristian Rangen2024-06-19 10:33:502026-04-23 17:10:32What’s the Business Model Behind (Operating) VC Firms?
The Project Catalyst report recently revealed a significant US$ 7.9 billion in gender lens investments within private markets. However, capital allocation to a new generation of fund managers offering innovative solutions remains low. To address this gap, 2X Ignite hosted a transformative event in April, gathering women/diverse-led fund managers and potential investors for an immersive three-day boot camp into the journey of fund management.
Strategy Tools played a pivotal role in this initiative. The boot camp – led by Elena Haba (2X Ignite Lead) , Christian Rangen, CEO of Strategy Tools, and Marijn Wiersma, Director of Community and Innovation at 2X Global – provided participants with a deep dive into the dynamic challenges of operating an investment fund. This event not only offered fund managers a platform to showcase gender lens investment opportunities on the African continent but also equipped them with essential tools and frameworks to navigate these challenges effectively.
“Participating in the 2X Ignite fund manager boot camp provided invaluable insights, illuminating the critical role of warehousing capital for emerging female fund managers,”
said Michael Brill, Senior Portfolio Manager for Equity and Fonds at KFW. This highlights the impactful knowledge transfer facilitated by Strategy Tools during the boot camp.
The 2XI Africa GP Sprint, a six-month accelerator program, was also launched at this event. This program aims to boost the fundraising journey of women/diverse-led fund managers with gender-smart investing strategies across Africa. Selected through a rigorous three-stage process, the cohort includes fund managers with diverse investment strategies and market approaches.
This initiative, co-hosted with and supported by Mennonite Economic Development Associates (MEDA) and FSD Africa, underscores the collaborative effort to foster inclusive growth and gender-smart investing in Africa. Dr. Dorothy Nyambi, President and CEO of MEDA, stated,
“This partnership is vital for MEDA’s mission to foster job creation, shared prosperity, and inclusive growth in Africa.”
FSD Africa’s focus on accelerating early-stage capital mobilisation, particularly for women and diverse GPs, was also highlighted by Mary Kashangaki, Assistant Manager for Early-Stage Finance at FSD Africa. She shared,
“2X Ignite’s immersive boot camp gave me insight into the journey GPs travel to effectively deploy a fund, shedding light on the challenges they often face along the way.”
The selected fund managers will work closely with the 2X Ignite team, an extended team of strategic advisors, and investment professionals from Strategy Tools and 2X’s global network. This collaboration aims to provide concrete feedback, tackle priorities, and ensure these fund managers are best positioned for their fundraising journey.
____________________________________________
Are you interested in bringing the Fund Manager! Masterclass to your city? Join us in our mission to empower fund managers and drive inclusive growth across the globe. Collaborate with Strategy Tools to host transformative events that equip fund managers with the essential tools and knowledge to succeed. Contact us today (hello@strategytools.io) to learn how we can work together to make a significant impact in your community.
https://i1.wp.com/www.engage-innovate.com/wp-content/uploads/2026/04/2x-ignite-africa-2024.jpg?fit=1845%2C820&ssl=18201845Christian Rangenhttps://www.engage-innovate.com/newsite/wp-content/uploads/2016/11/engage-innovate-logo-main-header-1-300x157.pngChristian Rangen2024-06-12 14:14:002026-04-24 14:15:52Empowering Fund Managers in Africa with 2X Ignite
With over 7,000 innovation clusters around the world, there are numerous ways to start, launch and build an innovation cluster. In this article we describe eight ways clusters commonly get started and what a cluster journey may look like.
What is an Innovation Cluster?
An innovation cluster, or often called industry cluster can be understood in two ways. The traditional view is that it is a collection of companies situated within some level of proximity, allowing for more collaboration, interaction, development of stronger ties and a natural growth of a collaborative strengths within the cluster.
Often called clustering effect or agglomeration economics, in this first perspective the cluster is a naturally emergent phenomenon, without any centralized strategy, structure or management organization. Agglomeration economics has been a widely understood concept since British economist Alfred Marshall first wrote about the concept in the 1920’s, and later popularized by academic like Michael Porter, Paul Krugman and Torger Reve.
The Italian wine cluster, New York’s financial district and Boston’s life science cluster are well-known examples of this first category.
The more modern view is that clusters (or cluster organizations) can be purposefully built and developed. In this view, the role of governments matter, either indirectly through taxation and industrial polices or directly through national cluster programs and direct funding schemes.
In this view pre-existing clustering of member companies matter, but there is also a positive belief that clusters can grow and develop over time, often developing from small, emerging clusters into globally oriented Innovation Superclusters.
Norway’s GCE Ocean Technology Cluster, Netherland’s Health Valley and Canada’s AI Scale Cluster are three such examples, all are actively built out over time and supported by bold government programs.
Ten-item Cluster Checklist
A collection of organizations with a shared intent to collaborate
Built around a specific theme or industry domain
Member-based networks built around future growth industries
Trust-based collaboration platforms
Engines of economic growth, by connecting 100’s of members and partners
Solving Industry level challenges & creating new market opportunities
Private-public Partnerships,developed by design
Magnets that attract talent, venture capital, researchers and companies
Project developer of large-scale, collaborative projects
Key player in the quest for national economic growth
Local or global mindset?
A key defining aspect with clusters is the local vs. global mindset. With a local mindset, the cluster is mostly focused on connecting local companies, hosting local events and building out a series of local development programs with local partners. Often, these clusters will tend to scope their work within a county or state border. For many, this can be a natural starting point, but a local cluster will have natural barriers to growth and will struggle to develop interesting partnerships and market opportunities over time.
Clusters with a global mindset are different. Here, the conversations are naturally focused on global market opportunities, global industry development and global trends and outlook. These clusters will often have pre-existing networks and relationships that allow them to naturally connect and collaborate with relevant markets, project and partners globally.
Questions like “how can we connect and work with global supply chains?”, “In which areas can we compete and win with the best companies and sectors – globally?”, “how can we attract the globally leading firms and investors to our cluster” are naturally discussed during strategy sessions.
With or without a public cluster program?
Crucial to anyone building an innovation cluster is whether a national or regional cluster program exists. Such a cluster policy, financing, development and support program can provide a robust national infrastructure to support the development and scaling of new innovation clusters.
Spain, Norway, Canada, Mexico and China all have strong cluster programs, either at the state or federal levels. Countries like Ireland, Finland, Costa Rica have historically not had such public government programs in place, leading to a structural lack of common cluster practices.
Interestingly, the US has long had a federal cluster initiative, the RIC or Regional Innovation Clusters initiative. Operated by the SBA, or U.S. Small Business Administration, the RIC program has long supported clusters like Defense Alliance, Montana Bioscience Alliances, Montec and UAMMI. While, at the same time, the US is also seeing a number of state-wide cluster programs emerge, like Utah’s Cluster Acceleration Partnership (UCAP).
Today, most national or regional cluster programs run highly competitive application processes; In Canada five out of 50 Supercluster applications were accepted into the five-year program. Beyond the application process and financing, many programs offer strategy development, market development programs, dedicated project financing, cluster leadership training, cluster board development programs and a wide variety of cluster competence development.
Research has often highlighted the need for cluster management expertise and leadership skills in successfully developing new cluster initiatives.
Who starts new innovation clusters?
In our work with clusters around the world, we have identified eight profiles to answer the question, “who starts it”? These personas can be found in diverse location and countries around the world. They all share a passion for economic development and growth, but view the starting point and roadmap quite differently.
Cluster Starters Map (Rangen, 2021)
The Market Builder
“If we collaborate better, create a joint value chain, and build out the gaps we face; from growth financing, market access, regulatory policies, need for new technologies and better export support; I believe we can develop new markets at home and capture huge markets abroad”.
The Market Builder will be driven by and focused on developing the cluster to go out and capture emerging market opportunities globally. In these clusters, go-to-market programs, market analysis reports and export activities are natural early initiatives.
The Problem-Solver
“Our industry has major structural challenges. We lack young people coming in, we lack good educational programs, we lack advanced R&D projects and we lack a good regulatory framework. These are challenges no one single company can fix. We need to connect and collaborate to solve these problems together!”
The Problem-Solver has deep experience in the industry and recognized the potential that can be unlocked if these problems are solved, and the industry grows.
The Visionary
“I believe Norway can become a global leader in life sciences – but we have to build out the industry at home and win markets abroad. Let’s get organized and capture the future opportunities!”
The visionary sees early opportunities years, or even decades, before others. He then manages to pull together a diverse set of actors to make this vision come to life.
The Government Lead
“In our region, we have great companies, but they are not always organized to capture new economic opportunities. In my role as a government or economic development lead, it is partially my job to get the key people around the table to develop early roadmaps to capture new industrial opportunities”
The Government Lead will often have a network, both locally and internationally, to spot early opportunities. These opportunities can both come from market demands or from new national programs opening up. The key is that he is able to connect the next group of people to move the early initiative forward.
Industry Network
“We have the potential to really build something exciting around Smart City, but we need to get the right companies to lead and the right people to join. Our small industry network can use our access into corporates, public and venture capital sources to pull the first outline of a Smart City Tech Cluster together”
The Industry Network is a loose network, often connected through personal relations more than any formal network. Across the network, there is a common aspiration to build out a more formal innovation cluster, knowing there will be significant challenges around early participantion and funding.
Executive Network
“We are competing on a daily basis; but there are some areas where it makes more sense to collaborate than compete. Let us talk about how we can solve common challenges and grow this industry 5X in the coming two decades. What would that take?”
The Executive Network is often the CEOs of the top four to five companies in an industry. Together, they recognize that industry level challenges like access to common data standards, sharing of industry data, access to venture financing and new MBA programs would be better solved if we worked together. The Executive Network will often see an instant business case and be wiling to fund the cluster’s early operations.
Economic Development Team
“Companies here are not innovating and growing fast enough. We need to develop more aggressive and innovative policies and programs to kick start new growth in the solar energy sector. Let’s develop a state-wide cluster program to drive new economic growth and create more jobs!”
The Economic Development Team has the best of intensions and often access to significant funding sources, but sometimes the team may struggle with getting industry interest and buy-in. Co-developing the cluster with genuine industry leadership is key to a successful outcome.
National Government Team
“Our country needs to accelerate our economic transformation. This requires government and industry to collaborate closely to rapidly build out the industries of the future. We have no time to lose as the global competition is intensifying and we need to compete faster to become the world’s leading semiconductor powerhouse”
In rare cases, the National Government team will lead the development of very focused innovation clusters. These are often linked to the key national industries, where the government is trying to improve the competitive position of its existing firms, while also supporting the transformation into the new technology s-wave. From oil and gas to clean energy and memory chips to system chips are two examples of this.
Two Cluster Journeys
While who starts it may be quite different, the motivation for and the early journey a cluster may take can also vary greatly. Based on our work over the past decade, we have developed the Cluster Journey Map to illustrate how different paths cluster may take, from the starting point to the end outcome. Often, this is a journey that should be measured in decades, not months or years.
Cluster Journey Map (Rangen, 2021)
Case Studies
Clusters can emerge from anywhere, sometimes coming from industry networks and leadership, sometimes from bold national policies. The following two mini cases illustrate how different clusters emerge and develop over time.
Western Norway, unable to pivot the cluster’s business model
One of Norway’s leading tourism clusters, based on the country’s west coast, got started in 2008, on the shared interest in growing the country’s tourism industry. Fully recognizing the upside in better collaborating and building out the professionalism of the industry, the cluster was shaped by an early industry network. Over time, the cluster developed a formal organization, funding model and strategy. After a decade in operation, the cluster faced the final stages of the national financing program. Unable the find a new business model, the cluster chose to close down its management and cluster operation.
South Korea Commits $450 Billion to Dominate Semiconductor Market
“Governments are deploying ‘wartime-like’ efforts to win the global semiconductor race”, read the May 17th headline on CNBC. With more than 150 companies involved, the government was pushing for a ‘transformational’ strategy to secure Korea’ future position in the industry.
Already a leading memory chip manufacturer, South Korea unveiled a bold national plan to build the world’s biggest semiconductor cluster by 2030. With a goal of attracting $450 billion investment from the private semiconductor chip sector including Samsung Electronics and SK Hynix, mainly driven by generous tax incentives and relaxed regulations, the government is pushing for global dominance with Taiwan, US and China, in the future chip market.
“Major global competitors are pressing ahead with massive investment to be the first to take the future market,” President Moon said in a speech. “Our companies have been taking risks and innovating as well and have completed preparations for tumultuous times.”
Known as the K-Semiconductor Belt strategy, the cluster will cover areas like advanced manufacturing facilities, new chip foundries, up to 50% R&D tax discounts, new support for ‘strategic technologies’, a new industry investment fund, new funding into university research and the training of 36.000 new high-tech workers in the chip industry. Ultimately, the initiative is expected to secure Korea’s global position in the chip race, double exports and create more than 100.000 new jobs by 2030.
A bold initiative like the K-Belt cluster would not have been possible with the leadership of a national government team. Aligning industry, academia, government around this strategy is required to be able to develop a response to the intensifying rivalry for dominance in the industry.
How are you building your innovation cluster?
From Sydney to Saudi Arabia, Lapland to Spokane leaders are finding new and better ways to develop future-oriented clusters of innovation. Some clusters may emerge over a decade, others are able to come together in a few months due to external pressures or specific funding opportunities.
Whether your cluster is being launched by a Market Builder, Industry Network or a National Government Team, all clusters are embarking on a lengthy journey, potentially a multi-decade journey of innovation, transformation and economic growth.
Research documents the economic impact of successful clusters. From early-stage entrepreneurship to late-stage scale ups, clusters can play pivotal roles in funding and scaling new high-growth companies. Modern government policies are showing more and more countries are leaning into national cluster programs.
The time to build better innovation clusters are upon us, to better compete and collaborate in the global innovation race.
The structure of My Angel Strategy Canvas
