Angels Vs Venture Capitalists

A talk from Marianne Hudson on Angel investment and then a talk from Niall O'Donnell on Venture Capital.

The evening was spent watching "Mr K" at the Foundation with huge pizzas.

Marianne's talk proved to be a great insight into the world of an angel and how they fit into the game of investments in businesses. I wasn’t aware of the huge scale of Angel investors and how much they contribute to businesses, especially compared to VC’s.
Angel investors are an overlooked, but highly valuable group for young businesses without enough value for VC’s to want to invest, but offer a good opportunity for an individual, or group of Angels to be interested.
Angels can bring money to the table, but maybe more importantly they can bring credibility and therefore might be the catalyst to securing larger funds from VC’s.
There are a lot more Angel groups around the world than I realized, and many who specialize in specific types of businesses such those owned by ethnic minorities, or who are from a certain area.
Overall it was a good overview of the Angel investment area, and clarified some areas that were unknown before regarding investment below the VC route.

Naill concentrated on the world of venture capital during his session. It made me more aware of the huge complexities of signing a VC deal, and the importance of the words written on the term sheet. Although I wouldn’t have attempted a deal without a good lawyer, I’m not even more aware that the quality of the lawyer has an impact on the deal, and I certainly won’t skimp on hiring someone that is both skilled and experienced.

Venture Capital firms vary greatly on how they will treat a company when they invest, so it’s not just about attracting a VC, but it’s about attracting the right VC. There are a lot of questions that should be asked before signing your company away, more than the obvious how much, and what percentage of the company. There are other factors, such as how long the VC firm wants to invest for, what’s their track record on both how many companies they have seen to exit, and how long this takes. You need to approach venture capital firms at the right time. If they are out trying to raise their funds, then they are less likely to want to invest in you, and if they do invest, they will potentially be distracting with raising their own money, rather than paying attention to you. Also you need to look at what stage the company is with their fund pool, as if they are towards the end of the funding cycle, they will want a much quicker return than if they are at the beginning. This might mean they force you to exit at an earlier stage than you want.

The environment of your business area will depend on what types of VC companies will invest in you. If you are in a hot area, then you need to show why you are better than anyone else. If you're out on your own, then why isn't anyone else doing it?

An ideal Angel is a retired expert from your field. The opposite is the local business man that isn't going to add any value to what you’re doing. If the Angel doesn't understand the sales strategy or the timeframes involved, then they're not good investors.

It was a good, solid presentation and has given me a platform of understanding that I can build on in the future.