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Evolving Malaysia’s VC Ecosystem: A Response To The great Mavcap Misfire

VC ecosystems around the world are maturing at different pace, each with its own set of challenges and dynamics. But the views articulated in The great Mavcap misfire (Emmanuel Samarathisa) come across as both flawed and based on the wrong underlying assumptions on how an emerging VC ecosystem actually works.

Here are my quick thoughts in response.

The Malaysian Context

Malaysia, like many other developing countries around the world has recognized the importance of shifting from a agriculture- and manufacturing economy and increasingly to a professional services and innovation-powered economy. By extension, this also means supporting and scaling startups, hopefully seeing them mature into major scale ups and eventually pillars of the national economy.

But, ever since these conversations started, Malaysia has lagged behind regional innovation hubs, with Singapore being the leading player. To deal with the growth challenges, several Malaysian governments have launched various initiatives to support the growth and development of the Malaysian startup scene, including:

–          Multimedia Super Corridor (MSC)

–          Klang Valley region – the Silicon Valley of Kuala Lumper (a vast stretch target)

–          MavCap & Cradle Fund

–          MDEC

–          The formation of MaGIC – Malaysian Global Innovation & Creativity Center

–          KL20

–          Malaysia Venture Capital Roadmap (MVCR)- with a goal to increase VC penetration rate to 0.25%-0.35% of GDP by 2030

(For full transparency, the author was a strategic advisor to MaGIC back in 2016-2019)

From Startups To Capital

Against this backdrop, we then need to examine the maturity of the venture financing ecosystem – and this is where the Malaysianist and the piece The great Mavcap misfire might be missing a few key points.

Transparency In The Market

In researching the article, the author has been able to access documents showing fund-level returns, based on Mavcap data. This is excellent and should be applauded. We recommend all government linked fund-of-funds to be openly sharing fund performance data on a regular basis. Kudos to the author for getting hands on and sharing the data.

What’s The Mission Of A National, Government-Linked Fund-Of-Funds?

MavCap (now, Jelawang), like any national fund-of-fund has a three-way mission.

1. Develop the local VC ecosystem (see our research on VC ecosystem)

2. Invest and back local and national fund managers (often, emerging managers)

3. Secure ‘attractive’ returns from the investments

The primary purpose of a national fund-of-fund is not to attain above-market returns. If that was the primary goal, there are many better asset classes, including buying real estate in Singapore or buying a pool of US listed equities, like Apple, Microsoft and Meta.

Instead, the national fund-of-fund strategy has a broad mission to develop the market, develop the ecosystem for long-term competitiveness. On this picture, fund managers is just one small part of the equation. Available growth capital, access to Limited Partners, professional service providers and a rich menu of exit paths are all equally important pieces in the VC ecosystem’s maturity.

The VC Ecosystem: Built on 8 key pillars (Rangen, 2024)

Where Does Malaysia’s VC Ecosystem Sit?

When we work with national fund-of-funds, we often start by a basic assessment of ‘where are we today’. Using the VC Ecosystem Maturity stages, we can quickly identify where the market is today, and where it would like to evolve into in the next 5-10 years.

Scaling VC Ecosystems Canvas, Rangen, 2024

Using this framework, we would assess Malaysia to set at level 2: Build.

At level 2: build, the VC investments sits around 0,2- 0,4% of GDP. The ecosystem is young and highly immature. Private allocators are not interested, as the market has historically failed to deliver any meaningful returns. The companies don’t scale, the fund managers are still learning and  the exit paths are just not there. There might be some good, local companies, but they mostly move to Singapore or Silicon Valley, due to the lack of a local ecosystem.

The biggest LP investors in this category are international finance organizations, like IFC, World Bank or national governments through a wide range of government-backed fund-of-funds. At this stage, few actually expect the fund managers to return back much, but see this as investing into the long-term capacity and maturity of the market.  There might be a few outlier deals, proving the evolution, but largely, at fund-levels, most funds underperform from a pure financial return point of view.

At level 2: Build, most of the capital that comes into the market is labelled as ‘catalytic’, or development purposes, rather than seeking above-market returns.

Often, this is misunderstood by the media, who will view any fund performance through the lens of a level 4: Perform or even level 5: Outperform lens, expecting outlier returns in a market that just has not grown to this stage yet.

Interpreting The Data

Reading The great Mavcap misfire, I believe the challenge comes on the interpretation and assumption side.

Here Are A Few Quick Facts:

–          Ca. 50% of all VC funds will never return back 1X net DPI

–          Ca. 20% of all VC funds will return back around 1X – 2X net DPI

–          Ca. 20% of all VC funds will return back 2X – 3X net DPI

–          Ca. 10% of all VC funds will return back at or above 3X net DPI

–          Out of those, around 2% will return back the 5X – 10X or even 200X net DPI

For anyone investing into the venture asset class for commercial returns, they would need to secure allocation to the top 10%, ideally the top 2% of funds globally. Some great thoughts from our friends at VenCap on this subject. (A wall of capital coming, VC is really hard and Return of the Power Law)

Further Facts:

–          Most VC funds need 12-16 years to see a full ‘seed-to-exit’ return profile. This is a challenge if funds are set up with 8-10 year timelines. This is simply too short

–          For many funds, there is a window of ca. 1-2 years, from effective exit transaction in the market, to actual pay-out (DPI) back to LPs.

–          For most, there is zero correlation between year 7 data and ultimate performance

–          For most, there is zero correlation between year 7 DPI and ultimate DPI

–          When assessing an active fund (which, given various extensions, might be 12+ years), we always need to look at multiple indicators to get the full picture. At a minimum, this would be called capital, MOIC, TVPI and net DPI.

Table of MavCap backed funds, from The Malaysianist.

So, What Does This Mean For The Great Mavcap Misfire?

The funds that are listed in The great Mavcap misfire seem to follow a pretty average distribution range.

There are a total of 14 funds, from 2013 to 2021 vintages. Two are listed as Divested or in current dissolution process. The remaining 12 are still actively managing their portfolios. Based on the available data, we can see that the DPI sits at 0 (to be expected by younger funds), 0.07 (Superseed I, 2016) up to 2.88 (Lunex Ventures, 2018). This looks like a perfectly normal range, with some not in DPI mode yet, some on the low end (very low end) and one early winner, Lunex.

But, This Dataset Is A Highly Incomplete Dataset And Zero Conclusions Should Be Drawn From This.

The reason: MOIC and TVPI. The table shows how much capital MavCap has put in (401,9M) and how much has been paid back (108,2). But, without knowing the MOIC and notably the TVPI, it is impossible to know how these 12 funds are actually performing.

Always Track TVPI And DPI

To illustrate the importance of adding a more complete dataset, I have created three scenarios below. Base case, bull case and bear case.

The Base case assumes a pretty normal GP fund performance in a level 2: Build VC ecosystem, allowing for some investments to happen in regional funds (including Singapore) and some to happen in global funds (with a certain allocation earmarked for Malaysia).

Three Examples When Adding TVPI

BASE CASE

In the base case, I have added 800M in total value (NAV + DPI) for the fund. The 800M would represent both the value of the current assets in the underlying funds, as well as the amount that has already been paid out to LPs.   Note the vintage period here runs from 2013 to 2021, but would then extend all the way to 2033, to allow the last funds to dissolve. This would give us a 20-year total timeline. In the base case below, we see the TVPI at 1,99X, which would be at a low end, but within a reasonable range for a developing VC ecosystem.

Base case, 2013-2021, assumed total value of 800M, for a 1,99X TVPI
BASE CASE: 2033 ALL FUNDS FULLY DIVESTED

In 2033, all the funds are liquidated, There would naturally be a mix of bankruptcies, write-offs, maybe some management buybacks, some secondaries with heavy discounts in order to liquidate, but the funds across  the portfolio has managed to deliver back a 1,62X net DPI to its LPs. Considering the 20-year timeline, this would give us a low IRR (internal rate of return), but all told, LPS like MavCap would effectively get their money back, adjusted for inflation.

Base case, 20233, all funds divested, 1,62 DPI paid back
BULL CASE

In the bull case, we have assumed that the total value of the portfolio, including DPI is 1,8BN. This would be an aggressive mark-up vs. our base case. A 1,8BN would give us a TVPI of 4,48X.

Bull case, best case development, 1,8BN in asset value, for a 4,48X TVPI
BULL CASE: 2033 ALL FUNDS FULLY DIVESTED

By 2033, with all funds divested, the bull case would be able to pay out, in our example, a total of 980M cash-on-cash, for a 2,44X net DPI. Note the reduction from 1,8BN portfolio value to 980M in payouts. This would likely come from a heavy mark-down of assets, a willingness to take haircuts to achieve liquidity in secondary markets and finally all costs and fees for the fund managers. Still, for most LPs, a 2,44X net DPI would be pretty ok, even very strong for a national fund-of-fund with the triple mission we mentioned above.

Bull case, 20233, DPI 2,44X
BEAR CASE

Of course, the reality is that most VC funds underperform. That’s also the case in our bear case. Things just did not work out. The market did mature as expected. Most talent drifted off to Singapore. Most fund mangers were unable to find meaningful follow-on rounds. Most companies stalled and burned out. A mixture of culture, limited access to capital and weak boards led to significant write offs and mark downs. In short, it was a bloodbath in the market.

In this case, we list the assets at 250M (down from 1,8BN in the bull case). This would give the portfolio a TVPI of 0,62.

Bear case, 2033, TVPI 0,62
BEAR  CASE: 2033 ALL FUNDS FULLY DIVESTED

Fast forward to 2033, bear case fully played out, the total exit value came to 200M. On an initial investment of 401,9M, this gives us a net DPI just below 0,5X. Financially, that would give us a 200M net loss. Yet, at the same time, considering the catalytic efforts to build out the VC market in Malaysia, the 200M could also be viewed as a net investment into the next generation of fund managers.

Bear case, 2033, DPI at 0,5X

Venture Capital Is Hard – And Even Harder In Developing Markets

In my executive education programs on venture capital investing, I always start with a detailed walk through of how hard venture capital investing actually is. Sure, if you are located in the heart of Silicon Valley, have access to the top founders, top programs and top funds, including exit paths like Nasdaq and tech M&A’s, things might just be a little bit easier (but still hard).

But the reality, for most countries, national fund-of-funds and ecosystems is that venture capital investments are hard, really, really hard. Most startups will fail. Many will deliver small returns at best. For a fund to be successful, you need to capture at least 1 Dragon (fund returning investment), maybe even two.

For most of the world, to be able to support and grow a domestic entrepreneurship scene, we need venture capital – and we need much more of it. We simply can not scale startups, new company formation and new job creation without access to venture financing at scale. But no one should for a second think this is easy.

One of the most common phrases participants share in our VC Masterclasses is, “wow, I had no idea it was this hard” (to deliver sustainable returns over time. Well, it is. Let’s not be native about it, but rather work for the long-term to build out more robust VC ecosystems.

What’s Next For Malaysia?

In my work with Malaysia over the past 12 years, I have seen the ecosystem grow and mature. Yet, the country still has a long way to go, to reach its aspirations as a globally leading tech hub.

One step, maturing the VC ecosystem and support a far larger pool of VC firms and capital allocators.

To this effect, the Malaysia Venture Capital Roadmap (MVCR) is a solid piece of work, serving as a great example for other countries in a similar position.

Malaysia Venture Capital Roadmap, 2024

In this conversation we need openness about fund performance, access to data set and we need journalists like Emmanuel Samarathisa to continue with their excellent reporting. But, we also need media to cover this topic with diligence, facts and insights, not assumptions and flawed data set.

I am excited about the future of the Malaysian startup ecosystem and seeing more successful startups, scale ups and fund managers emerge from this amazing country. Reflecting back on my recent trip exploring the VC ecosystem in MENA, I see a vast potential for Malaysia and the wider SE Asia region, but the VC ecosystem will need to continue to evolve – rapidly and professionally.

The author is a strategic advisor to national fund-of-funds, governments and VC ecosystems globally. He has taught a wide range of venture capital executive education programs, including at IMD and NVP. He has worked with 250+ emerging fund managers and regularly hosts VC Masterclasses. His upcoming report on Scaling VC ecosystems is aimed at helping all stakeholders better understand how to create more mature venture financing ecosystems around the world.

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VC: Education vs Acceleration – A Shortlist of 40+ Top Learning Programs in Venture Capital

VC Lab or Allocator One? Sanabil x 500 or Newton Venture Program? Coolwater Capital or Thema? Pitch Me First or Baby.VC? 2X Ignite or IMD’s Venture Asset Management? Classroom learning, fellowship or acceleration? For new and experienced people in the global venture capital space, the number of learning opportunities has just exploded. How can current and aspiring fund managers navigate in the 40+ programs out there?

By: Christian Rangen
September 2024

This blogpost is a part of our wider research on VC Ecosystems.
Pre-register for the full report here
Disclaimer: the author is faculty, program management, mentor or advisor to several of the programs mentioned in this post.

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The venture capital industry is booming, with more than 10X growth in AUM (assets under management), and 6X number of new firms since 2008. But how do new managers learn the ropes? What are the learning paths in the venture capital space?

Over the past five years we have been teaching, educating and accelerating more than 250 fund managers across different strategies and markets. For us, it has been an immensely rewarding journey, helping us better learn the global market, the nuances of LP value propositions, explain portfolio constructions and describe the key roles on a GP fundraising team.

During this work, we started the research behind ‘Scaling VC ecosystems’, and our learning journey took on a far more structured, research-focused approach. Researching more deeply the learning programs, educational offerings and accelerators available to managers globally, we identified a rapidly growing number of programs. This perked our curiosity. We dug in.

40+ Unique Programs

In total, to date, we have identified 40+ unique programs (and we are guaranteed to discover many more yet to come). High-level, we separate these 40 programs in two main categories education vs. acceleration.

Mapping the landscape of 40+ VC education and acceleration programs (2024)

For Education, we believe the primary focus of the group is to teach, develop skills and expand mastery of venture capital. This can be done in a classroom, online, immersive in the Valley or through extensive fellowships.

For Acceleration, we believe the primary focus is to help and support the fund managers to more quickly launch the fund and get to first and final close. In most cases, this is a process that can take 18 months, easily up to a few years. With the right support, it can be accelerated to just months.

Eight Strategic Groups

We structure these 40+ programs in eight strategic groups. Each group representing a collection of programs available.

Duration:
Short: 2-to-5 day duration
Medium: 4 week to 12 week
Long: 4 months to 24 months

Primary focus:
Learning: classroom or teaching format.
Goal: learn the fundamentals

Fellowship & learning: Community and action-based learning
Goal: Learn through network and experience

Acceleration: Supporting (back office) and accelerating fund managers to first and final close
Goal: Support a faster timeline to fund setup and closing

The Eight Groups –
Understanding the Learning Landscape

1. VC Associations

Globally, venture capital associations offer a wide array of education programs. From 2-day ESG Masterclasses, 3-day Fund Manager Masterclasses, 2-day Exit Masterclasses and 4-day fund reporting programs, these are usually between 1-day and 5-day in duration, and tend to be class-room or workshop based.Well developed ecossytems, like the UK, offer professional credits, like CPD accreditation to participants, allowing the participants to profile their education on LinkedIn and professional resume.

Selected examples:

Sanabil x 500 VC Unlocked

A week-long course designed to train and empower emerging fund managers in the Kingdom of Saudi Arabia.
Learn more

How to Plan an Optimal Exit


1-day, in-person masterclass on planning and delivering successful exits in your portfolio.
Learn more

AVCA – African Venture Capital Association
Venture Capital Masterclass in Partnership with EAVCA 

2-day, in-person masterclass on successful VC funds
Learn more

VC & PE Limited Partners Program

A 3-day, in-person program for educating LPs on VC and PE fund investing in the Middle East.
Learn more

2. Short-Term Educational Programs

A growing number of business schools are offering world-class education programs in the venture capital space. These programs are aimed at existing fund managers, emerging fund managers, Limited Partners and ecosystem builders.

These programs also tend to sit in the 2-day to 5-day range. Taught by world-class faculty, these programs offer more academic recognition than our previous group of VC Association delivered programs.

Notable examples:

IMD Venture Asset Management

2-day program with a focus on how Limited Partners and asset managers can understand the market and better make investment decisions into venture capital funds. Faculty: Jim Pulcrano
Learn more

Berkeley Venture Capital Executive Program

5-day executive program to learn how to skillfully navigate the venture capital world, delivered in the heart of Silicon Valley, or online. Faculty: Jerome Engel
Learn more

3. Short-term Immersion

Short-term immersive programs take participants into the field, allowing them to meet funds, meet founders and experience the ecosystem up close and personally.

These programs tend to run over 1-2 weeks, allowing a more ‘get out of the classroom’ approach to learning than traditional executive education programs do.

Notable examples:

Stanford x 500 VC Unlocked


With over 400 completed participants to date, the Stanford x 500 VC unlocked program offers participants the chance to experience the Silicon Valley ecosystem personally.
Learn more

Venture University


Venture University offers a range of executive education and acceleration programs. Their VC Masterclass offers participants to join in San Francisco, Hong Kong or online.
Learn more

4. Medium-Term Education

Next, medium-term education programs tend to run from 12 weeks to 12 months. They often combine in-person and online formats, for maximum flexibility. Still designed around classrooms, they tend to be run by large business schools, or at least in partnership with leading business schools.

Notable examples:

Newton Venture Program (London)


Offering three programs, Foundations, Fundamentals and Fellowship, NVP working in partnership with LBS, has brought a strong diversity lens to the VC education landscape in Europe and beyond.
Learn more

Columbia Business School: Venture Capital: Investing in Early-Stage Startups

Building on its success with shorter-term programs, Professor Angela Lee has designed a robust and flexible program covering both venture capital and private equity.
Learn more

5. Medium-Term Fellowships and Learning Programs

Our next category, fellowships and community-based programs tend to happen outside of the confines of academia, usually offering a ‘learning by doing’ mindset vs. educational credits. While business schools may partner with these programs, they largely tend to be

Notable examples include:

Dream VC (Africa)


With an impressive growth since its launch in 2021, Dream VC has already delivered programs for 170+ participants, from across 30+ different countries. Offering both a Launch into VC (entry) and Investor Accelerator (intermediate), Dream VC has had significant impact on the African VC ecosystem already.
Learn more

Dubai Future District Fund Fellowship

Based in Dubai, the DFDF fellowship is a 6-month program aimed at fostering the next generation of Emirati venture investors.
Learn more 

Included VC


A fully-funded, 5-month global VC fellowship, the Included VC program is aimed at helping top talent break into VC for the first time. Think of us like a “unique fast-track MBA for venture capital” for extraordinary leaders, says Included VC.
Learn more

6. Long-Term Fellows Program

Globally, the single most sought-after VC learning program is likely the Kauffman Fellows Program. It also sits as the only program in our Long-term Fellows Program group.

A two-year fellows program with three pillars, expert-led workshops (20%), expert-led keynotes and lectures (40%) and peer-learning (40%), the Kauffman program

In operations since 1995, the Kauffman Fellows have 940+ alumni in 61 countries. As a network, the Fellows represent over $290 billion in assets under management, have collectively raised over $790 billion dollars in capital, and have been responsible for over $8.5 trillion in exits to LPs.  While very challenging to get accepted and , at $80.000 + travels, pricey for most emerging managers to afford, the Program is one of the absolutely pillars of building out the global VC ecosystem, one network connection at the time.

https://www.kauffmanfellows.org

Snapshot of the Kauffman Fellows Program, 2024

So far we’ve looked at education programs, either in the classroom, in the field or through engaging fellowships. These programs vary in target audience, ranging from anyone who wants to break into VC, aspiring managers, emerging managers, seasoned managers, limited partners and ecosystem builders.

The next two groups are both designed around accelerating first-time and emerging fund managers.

While still a learning journey, the accelerator model means that the participants are all in various stages of (trying to) raise their fund, completing the legal setup and back office or successfully reaching their targeted closing milestones for the fund. These participants may still very well have more to learn, but their focus is closing real deals, winning over skeptical LPs, securing enough working capital, hire their next team members and handle all aspects of back office and reporting.

This is where our accelerators come in. Just like with a startup accelerator, these programs are designed to make things go faster, smoother and hopefully better than the founders (in our case the General Partners) would have been able to do themselves.

For all practical purposes, we are now trying to accelerate investors, not startups. Here we find two strategic groups, with a growing number of programs.

7. Medium-Term Accelerators

Medium-term accelerators tend to run from 4 to 8 weeks (up to 14 weeks), offering extensive support on network, introduction and fund manager readiness.

These programs come with different business models, from government-backed, free to attend, to participation fee for the GPs.

Notable examples:

Coolwater Capital’s Build Program

Having published two books on how to raise and set up VC funds, Coolwater founder Winter Meads has established himself as a thought leader for emerging managers. Coolwater’s Build GP accelerator program has supported 200+ funds over 9 cohorts to date. Coolwater also makes selected LP commitments intoemerging fund managers.
Learn more

Moremi Platform

Based in East Africa, the Moremi Platform is an intensive 4-week program that provides structured training, investment readiness, technical assistance and network to early-stage gender smart funds on the continent. A partnership between Kuramo Capital and Solt Advisory, Moremi is launching its first cohort in 2H 2024.

Learn more

VC Lab


This article would not have been complete without mentioning (paying respect, really) to Adeo Ressi and the team at VC Lab. Since inception in early 2020, VC Lab has run 15 cohorts, received 17.000 applications and accelerated 501 funds globally. Their mission: help launch 1000 new VC firms worldwide by 2025. With a free, 14-week curriculum, and a target to close funds in under 6 months (vs. industry standard of 18+ months), VC Lab is the global #1 GP accelerator. Recently, they also expanded with LP Institute, accelerating new limited partners globally.

Learn more

8. Long-Term Accelerators

Taking a longer-view on the challenges of raising a VC fund, the long-term accelerators work very closely with the GP team over a series of months and beyond to secure not only a successful fund raise, but also the longer-term back office, reporting, deployment and financial impact.

In this group, most of the programs are either government backed (free to attend), for a fee & success rate, or the program takes an ownership in the GP Structure. A notable difference between the short- and long-term accelerators, is that the long-term accelerators tend to offer or bring in capital to the managers. This can be done through working capital loans (ICFA), warehousing (2X Ignite) or LP anchor commitment (Thema, Allocator One).

Contrary to short-term educational programs, these long-term accelerators aim to be genuine, long-term partners on your journey. This includes capital, network, services and a long-term community and network lens. In the case of PMF (Pitch Me First), they offer a 6-month program, focused on raising institutional LP funding, and then extending this with another 6-month post-program support.

Notable examples:

International Climate Finance Accelerator

Support pillars from ICFA – International Climate Finance Accelerator, Luxembourg


An independent non-profit association, set up as a public-private partnership in 2018 under the Luxembourg Climate Finance Strategy, ICFA is backed by the Luxembourg government, industry and the EIB. On a mission to accelerating the climate finance leaders of tomorrow, ICFA is the number one climate VC accelerator globally.

Since its launch, ICFA has backed 34 fund managers over 7 cohorts, now tracking more than $3,3BN in AUM with the program alumni. In June 2024, the Luxembourg government announced the expansion of ICFA to include the ISFA – International Social Finance Accelerator

Learn more

2X Ignite GP Sprint


Probably, the world’s leading six-month gender-lens accelerator, the 2X GP Sprint is completing its 3rd cohort, having accelerated 25+ VC/PE/SME and debt funds since its inception. 

Designed by a 120+ large community of GPs, LPs, allocators, advisors and experts, the 2X Ignite is a part of the larger 2X Global gender finance platform on a mission to unlocking gender-smart capital at scale. 2X Ignite aims to accelerate the next generation of women-led, gender-smart fund managers – and to fund underrepresented founders.

2X Ignite is currently building out multiple pillars, including free digital academy, warehousing capital, working capital and global LP networks.

Learn more

Allocator One

Allocator One’s Model (Forbes)

Coming out of the European tech ecosystem, the team behind Allocator One runs a 12-week, intense program to accelerate first time, (ideally, sub-$30M funds) to first close. Aiming to invest in the best new fund managers all over the world, Allocator One becomes  an early LP in your fund (think, pre-seed investor), with €1M – €2M in LP commitment, with 1% management fee and 10% carry.

Beyond the program and early LP anchor, Allocator One offers a full menu of fund services, including back office, reporting and compliance, potentially saving emerging managers months of work and frustrations.
Learn more

Designing Ellen’s Learning Journey

In startup life, founders can – in some cases – jump from accelerator to accelerator, joining a pre-seed program, an impact program, a CVC program and a flagship scale up program, all in the span of a few years.

In venture capital, the education and learning ecosystem is much less developed, with fewer programs, most of more recent vintages (keep in mind, programs like VC Lab, Dream VC and Coolwater Capital’s Build program were all launched in the last four years). But, as it turns out, with the recent rise in education and acceleration, emerging and experienced fund managers can, in fact, design a learning and development journey spanning multiple programs and multiple accelerators.


We’ve illustrated this with a selection of 19 programs, featured below.

Design your learning journey in the VC space

Ellen’s Journey in Venture

Let’s go through this journey with a story about Ellen, our over-ambitious, aspiring fund looking to break into venture, along the way going through five different stage of her learning journey.

Stage 1: Breaking into venture

With 2-years in corporate finance, and another 4 years as an operator in an AI climate startup, Ellen is starting to think about a future career in venture capital, but where to begin?

Her first step?
Venture Deals, the book and the online, 6-week program is a good way to get started. Next, with the motivation in place, either taking the 16-week Going VC course or the Newton Venture Program’s Foundations online course (hey, it’s free) could be great next steps.

With that learning completed, Ellen could start following a few Podcasts, like 20VC or EU.VC, or book up a few books like the Business of Venture Capital and Raise: the female founder’s guide to securing investments.

Next, looking to expand her network in the industry, Ellen could apply for Dream VC (if she was based in Africa) or Included.VC (if she was located in Europe). Both competitive programs would offer excellent learning opportunities, network and community to build her foundation to join the industry full-time.

Stage 2: Getting the idea for the first fund

As months pass, and Ellen realizes she has an appetite for all things VC, she may realize that her career path is not joining an established VC firm, like Passion Capital, Atomico or 500; but rather launch her own early-stage, first-time VC fund.

At this stage, with things starting to get serious, she might choose to sign up for VC Lab, and sprint through their 14-week online program. This could keep her busy, with sessions and deliverables easily taking up 25+ hours per week. But, with the time invested, she would also be fast-tracking her fund’s investment thesis, strategy, portfolio construction, deal access and – notably – her LP mapping. Realizing, building a solo GP fund is hard, she could bring in 1-2 more like-minded investment partners, and set the foundation for their first fund C.AI Fund I, managed by the firm, Climate AI Capital Partners (not yet legally set up, though).

Alongside her two trusted partners, Ellen might choose to apply for Thema (UK) or Allocator One (Austria), both strong, early backers to first-time fund managers and excellent choices for an early-stage, smaller funds.

Stage 3: Launching Fund I

Six months into the journey, and getting closer to the coveted first-close, Ellen and her team might realize that the International Climate Finance Accelerator in Luxembourg might be an excellent choice to secure some working capital, access the LP ecosystem and get more strategic support for their climate x AI thesis.

Alternately, with more of an emerging market focus, maybe looking to deploy 50% of the fund with a gender-lens into SE Asia or the Middle East, Ellen and her team might choose to apply to the 2X Ignite GP Sprint and get full access to the strategic advisors, learning platform, community, in-person training sessions, in-person LP meet ups, LP network and more.

Both options would be strong accelerators to help the fund push towards first, second and final close. Maybe, along the way, Ellen may join 1-2 VC association trainings, like the BVCA’s Financial Modelling course or ESG course.

Stage 4: Launching Fund II

With a sub-$30M in the bag and partially deployed, the clock is now ticking on fund II. After all, those management fees only go so far with just one fund, right?

Recognizing that ‘what got us here will not get us there’, Ellen starts looking at support to access those institutional LPs. She lands on a few choices. First, she signs up for the Newton Venture Program’s flagship program, Fellowship, running over six months. This helps her build out her network and reflect more deeply on the market position and strategy of fund II. Next, if she’s aiming to stay in Europe, the Luxembourg-based Pitch Me First, six-month program will help the fund get ready for institutional LPs. Yet, looking more towards the US market, Coolwater Capital’s Build program is looking attractive to access more US-centric LP networks. Tough choice, though choice. But, with her eyes towards Europe, Ellens lands on Pitch Me First, choosing to save Coolwater for the work on fund III, in about two more years (fast fundraising cycles).

With the support of her new-found network and accelerator program, Ellen and her team breezes into a successful over-subscribed closing of fund II, now with $80M AUM.

On her first vacation in two years, in Rome, Ellen spends her evenings sipping red wine, reading up on the Exit Path book and reviewing her notes from the recent BVCA training on how to deliver successful exits.

Stage 5: Launching Fund III

Time flies when managing VC funds, and the team is maxed out deploying in line with the stated strategy and helping portfolio on advancing climate technologies and climate impact. Never mind, dealing with a shifting regulatory landscape, building out FOAK financing skills, hiring strategic CFOs in the portfolio and closing follow-on deals with Seres B-D funds.

Three years after the successful closing of fund II, and a respectable 2,1X DPI in fund I and 1,8X MOIC in fund II, fund III is knocking. This time, there is an urgent need to start meeting US-based LPs and generally expand both professional networks and trusted co-investors. It is time to take a step up, and apply to the Kauffman Fellows Program…..

What is Your Learning Path?

While, over the past five years, the available education and acceleration programs have exploded, much work remains to build out a better, more equitable and balanced VC industry globally.

We hope that a continued, professional development of new education programs, new fellowships and new accelerators both can and will continue to drive the industry forward.

We hope this article can help aspiring, emerging and established managers choose their own learning journeys, over time leading to better networks, better managers and ultimately better outcome for founders, GPs LP and the ecosystems overall.

Are you looking to develop a VC education or acceleration program?

Talk to us at hello@strategytools.io

Want to read more of our recent research?

Pre-register for the upcoming Scaling VC ecosystems report and watch out for our upcoming blog post Building a GP Accelerator.

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The Four Types of Emerging Managers

Imagine you are planning to summit Mount Everest, or participate in the Paris-Dakar rally, or run your first Ironman competition. Naturally, you would want to spend years preparing, training, researching and building your own mastery. The alternative would likely be gambling for luck or facing a harsh and brutal reality check.

The same goes for emerging fund managers. We are on a mission to help future-, first-time and emerging fund managers be as prepared as possible for the journey ahead. We are on a mission to fundamentally alter the odds for emerging managers, notably in the gender- and climate space.

In our work with 100’s and 100’s of emerging managers around the world we have noticed a pattern in terms of ‘setting yourself up for success’. While we never question the intelligence, dedication and persistence, we have found there are very different profiles trying to set up a first-time fund. Some are naturally more successful than others. In this post we try to map out, identify these profiles. We call them “the Tourist”, “The Fund Expert”, “The Networker” and “The High Performer”. In our day to day, we see them all. We have also written a short outline, a challenge and some possible solutions for each of the four.

Our hope is that this short guide will help future emerging managers set themselves up for success in the best possible way, reduce the time it takes to set up a first-time fund and overall increase the odds for future gender- and climate fund managers.

The Tourist

The Tourist is “looking around, want to do something exciting”. Got some names, but very limited market knowledge and LP relationship.

The Tourist is frequently deeply passionate around the theme (climate, gender, tech, equality, etc), but may have only patchy professional experience in the theme.

Often, the Tourist  has seen certain elements of private market investing (like angel or SPV deals), but never appreciated the full complexity of raising LP funding and operating one or multiple fund vehicles.

While extra challenging, Tourists do raise funds and eventually grow into experienced fund managers, but the probability to raise the first fund is low and the workload to get there will be excessive.

Challenge

Significant challenges to reach successful close within a reasonable (18 months) timeframe. May get a lot of meetings, but clearly not hitting GP-LP fit. The process may drag on – possibly for years-  without really making any fundamental progress. May be able to raise the fund, eventually, but limited understanding of the work required to operate the fund.

Solution

Reflect deeply whether you have the drive, motivation and grit to raise this fund. Recruit people with proven experience, possibly even more senior than yourself. Recruit experienced talent into roles as mentor, LPAC, advisory board, board and venture partners. Find a really good fund administrator, legal advisor, accountant and auditor. Consider joining a GP accelerator program like VC Lab, 2X Ignite, DFDF Fellows, Coolwater or Dream VC. Seek out more education. Consider taking a full-time job in the industry for another 1-5 years to build your expertise, network and long-term chances of success.

Four Types of Tourists

Quick departure:
Wow, this is really hard. Goodbye! Goes back to consulting, banking or C-level job.

Optimistic beginner:
Not learning, not developing, but remaining very (overly) optimistic, struggles to raise the fund. Not sure why.

Emerging realist:
Slowly recognizing this is hard, will be hard. Was not ready for the level of difficulty and amount of rejection. Sours on all things early-stage investing. Push through?

Strong learner:
Learning the ropes quickly. Able to grow into an Expert role and engage well with LPs. Will evolve into any of the other categories over time.

The Fund Expert

The Fund Expert will usually have had a long and successful career in fund management, often at a large bank, a DFI or a fund-of-fund. She has often been on the other side of the table from emerging managers.

Challenge

Limited LP network. Limited experience with the networking, the sales work and the hustle required to get a new fund of the ground.

Solution

Reflect on the partnership as a group. Consider adding dedicated resources on fundraising, including Partners with more LP access. Consider using a placement agent. Consider working a few years in a different firm to build more LP relationships. Consider staying in the current job longer to allow more time to develop LP networks before branching out to start a fund.

The Networker

The Networker has most likely worked in an investment bank, BD role in a fund-of-fund, built angel networks, structured SPV deals or similar outward facing role.
Trusted name in the ecosystem.
May run a widely read newsletter.
Excellent stakeholder relationship skills.

Challenge

Limited professional experience from a VC/PE/SME/Debt fund. Unlikely to have much experience with the key building blocks of a fund, deal sourcing, legal setup, LP search, portfolio value creation, follow-on, exit strategies and LP returns, fund management and operations. Will most likely underestimate the challenges of operating a fund over a decade.

Solution

Consider bringing in partners with a different profile and skillset. Consider outsourcing all key aspects of fund admin and operations. Seek more education and training on all aspects of fund management. Notably, learn key elements around deal terms, investment memos, value creation and exits.

The High Performer

The High Performer has extensive, proven experience building, raising, running and operating funds. Most likely held multiple partner or senior leadership positions with previous funds. Proven ability to source deals, structure deal terms, make investments, support founders, and realize attractive returns for LPs. Has wide networks and deep relationships with possible LPs. High probability of finding GP-LP fit early on.

Challenge

Likely the first time setting up a new fund and firm. May underestimate the time required to get to first and final close.  May underestimate the time and commitment required to get a full team up and running.

Solution

Bring in more experienced GPs as mentors, board members, advisory board members and team members. Set up a system for coaching and onboarding new team members faster. Be realistic on all timelines, from LPs, team members and deals.

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By identifying and addressing the distinct characteristics and hurdles faced by “The Tourist,” “The Fund Expert,” “The Networker,” and “The High Performer,” this guide offers essential insights and practical solutions to help future managers navigate the complexities of fund management. Our goal is to streamline their journey, increase their chances of success, and foster the development of impactful funds, particularly in areas like gender and climate. With the right preparation and understanding, emerging managers can turn their vision into a successful, sustainable reality.

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VC: Upgrade Your Value Creation Toolbox

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

Click here to download the full deck of Value Creation cards

Heading Back to London

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

Click here to download the slides we used during the module in the Newton Venture Program.

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Join the Webinar

Want to learn more about venture capital value creation? Join us for our webinar on September 13, 2024. Grab your free seat here.

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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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The Eight Angel Investor Types: Which One Are You?

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.

Download the Business Angel Universe Map

Why use the Business Angel Universe Map?

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.

If you are just getting started, maybe you should check out our next article, What’s Your Angel Strategy?

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.

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Empowering Fund Managers in Africa with 2X Ignite

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.

The eleven selected Fund Managers are:

  1. Janice Rudo Sambaza and Rufaro Maunze-Bhebhe, Aisiki Capital
  2. Jenni Chamberlain, Altree Kadzi Gender Climate Fund
  3. Maelis Carraro, Catalyst Fund
  4. Amanda Kabagambe, East Africa Growth Impact Fund
  5. Nyeji Mhango and Yvonne MPala, Equifund 1
  6. Hilina Resom and Addis Alemayehou, Kazana Fund
  7. Diago Dieye, Khuwaylid Capital Fund I SAS
  8. Aissatou Le Blond, Opera Green Industry Capital 4.0
  9. Yvonne Ofosu-Appiah and Mandy Nyarko, Sahara Impact Ventures Fund I
  10. Amaka Okechukwu Opara, WEAV Capital
  11. Egla Ntumba and Jill Curr, MsFT Ventures

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.

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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.

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