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Winning Across the Capital Stack

by Christian Rangen & Henrik Amstutz

A New Capital Landscape

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.

We really appreciate this article from our friends at CTVC, providing an insight from Key Frame Capital.

Infrastructure and Heavy Assets: Study Your FOAK

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:

  1. Diversifying funding sources: Explore grants, debt, and revenue-based financing alongside traditional equity.
  2. 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.
  3. Understanding investor expectations: Be aware of the different risk-return profiles across the capital stack.
  4. 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.
  5. 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:

  1. Educating founders on blended financing: Provide training on various funding sources and their implications.
  2. Fostering connections with diverse investors: Build networks with debt providers, grant agencies, and revenue-based financiers.
  3. Redefining success metrics: Shift focus from just equity raised to overall capital efficiency and financial sustainability.
  4. Supporting financial planning: Assist startups in creating comprehensive financial strategies that leverage blended financing.
  5. 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.

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Introducing the Business Angel Masterclass

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.

Want to know more?

See how Tiye Angels & Strategy Tools are transforming Egypt’s investment landscape by empowering female angel investors

Do you want to bring the Scale Up Angel Masterclass to your region? Read more here or talk to our team.

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What’s Your Angel Strategy Part 2: Digging Deeper

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

Catching up with our four angels

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

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

Digging deeper with angel strategy canvases

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

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

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

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

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

Emerging vs. experienced angel investors

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

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

Returning to our four angel investors

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

Low deal flow, high tickets (Jacob)

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

Trusting the network (Jill)

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

High Volume (Moritz)

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

High-volume, corporate climate tech champion (Heidi)

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

There is no, one single correct strategy

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

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

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

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

Assessing Your Angel Strategy

Now, it’s your turn.

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

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

Good luck with shaping your angel strategy.

A note for angel investor networks

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

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What’s Your Angel Strategy?

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

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

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

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

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

Introducing My Angel Strategy Canvas

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

The structure of My Angel Strategy Canvas

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

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

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

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

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

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

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

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

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

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

All angels are different

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

1. Low deal flow, high tickets

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

2. Trusting the network

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

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

3. High Volume

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

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

4. High-volume, corporate climate tech champion

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

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

Your Turn

Now, it’s your turn.

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

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

Good luck with shaping your angel strategy.

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