👋🏾 Hi friends!

Wishing everyone who celebrates a Happy Diwali and Prosperous start to the New Year 🪔

Here’s a glimpse of me in my full regalia dancing the night away this weekend 🕺 

On a separate note, I’m really pleased to announce a small investment I made into Ashore which aims to allow you to work from anywhere - think AirBnB meets WeWork (ok maybe not WeWork 😬 ).

As someone that does travel a great deal and uses AirBnBs more often than I would like to, I’ve had numerous experiences of WiFi not working, a lack of work spaces and all sorts of things that make them less conducive to getting any work done.

Aled and the team at Ashore decided to focus on the growing number of businesses - and individuals - looking to run offsites or take a beat and work from somewhere different for a while.

Super excited to be backing them and look forward to using one of their sites in the near future!

Now let’s get down to business…

In this weeks Off Balance, I’ll be chatting about:

💸 Getting started as a small cheque angel investor
🏢 What company structure you should establish in the UK or the US

Also, in this week’s Nothing Ventured, I spoke to Dom and Elliot Chapman, founders of Chapman Capital. We talked about founding, building and exiting and the move from building their own agencies to rolling up others’ and how they bring replicable processes to help them scale.

As always, our Primer episode gives you a bit of background on how they got to where they are today 💪 

Also, if you have any feedback, or if there’s something you’re desperate to see me include, just reply to this mail or ping me online - I’m very open to conversations.

If you like what I’m putting out, do give me a follow on LinkedIn, Twitter and Instagram.

(If you are trying to connect with me on LinkedIn, maybe read this post I wrote and make sure to start your request with “Off Balance” and, more importantly, tell me why you’d like to connect 💪🏾)

Don’t forget to like, rate and subscribe to Nothing Ventured on Apple, Spotify or YouTube, it really helps more people see what we’re doing - you can find links to these (and more including my Office Hours) right here!

Now let’s get into it.

How can did I add value?

I was blown away by the take up for my office hours which kicked off in earnest last week.

The first few folk to have signed up had a wide ranging spread of questions which I tried to help them work through - in some instances it was pretty simple, in others a little more complicated.

The first conversation was pretty crazy - I was speaking to someone who manages a family office. They wanted to understand how to get into early stage investing.

Now the reason that felt a bit crazy was because when you’re managing a family office, your job is literally to invest. But it soon became clearer why we were having the conversation!

By way of background, the family office invests in a pretty diverse range of assets (as most family offices will). But more specifically with technology businesses it’s investing at much later stages, from the late letter rounds (Series D and beyond) all the way up to IPO.

The way those deals work is very different from the sort of earlier stage startups that come across my table.

You have to think about building deal flow as well as making a decision on what to invest in - especially when you’re doing this as an angel can be very different from doing it professionally.

Here’s what I talked about.

Thesis
When you are getting into angel investing, it helps to have some sort of structure around what you are looking to invest in. This may change substantially over time, but you want to have some idea as to what makes sense for you.

For example, I pretty much won’t look at anything in the D2C / eComm / FMCG space because I just know that these are so dependent on large amounts of capital to fuel marketing that breaking through can be quite difficult.

But at the same time, I have invested in a D2C high end fitness product - less because it’s consumer, more because of the tech that they’re building and the fact that one of the core pillars I want to invest in is health and wellness.

You also need to figure out the sort of cadence of investments you want to make and how much you’re willing to invest.

As it happens, like me, this individual is looking to make small (£1 - 2k) investments in around 10 startups every year.

Given the fact that we’re capital restricted, you have to get better and better at saying no to most things so that you can put your money to work in the startups that you really want to back.

As a side note, I also recommend that those getting into angel investment consider the following:

• Your first few investments should be treated as for learning only. You will get lots of things wrong but if you accept that and bake that in to your thinking, those first cheques become the price of admission to learning what works for you.

• It’s pointless having only a few investments - portfolio construction still holds for angel investing so you want a relatively large spread of investments in order to have the potential to capture value from one of them.

• Make sure you speak to your significant other (if you have one) about what you’re planning to do. At the end of the day, you’re going to be tying up your cash for several years, if not a decade or more. It’s always wise to ensure you’re both on the same page - it won’t make a difference to what you invest in, but it may make life a little easier as you grow your portfolio!

Deal Flow
One of the first things you need to figure out as an angel is where your deals are coming along with the sort of deals you actually want coming to you.

For me, given how much I am present online, over time I have been able to increase the number of deals that are coming across my table.

With that said, it doesn’t necessarily mean that these are the deals I want to be investing in. There’s a high degree of filtering I have to go through.

For this individual, it’s likely that they actually come across a bunch of deals that are too early for their family office. In this case, they have the opportunity to look at those from a personal perspective rather than discarding them as too early for the FO.

But ultimately, a lot of deal flow is also about reaching out directly to founders building companies you’re interested in - whether they’re raising a round right now or not - and generally getting your name out there.

Syndicates and Angel Groups
Notwithstanding generating your own deal flow, it’s normally a pretty good idea to get involved with a syndicate - either formal ones as can be found on AngelList, Odin or informal ones like a couple of the WhatsApp groups I’m on.

The reason for this is that:

a) you will likely be presented with a lot of deals you would ordinarily not have seen

b) a lot of the people behind and within these syndicates will have been investing for longer periods of time so may have honed their skills much more than you will have by now. They allow you to ‘outsource’ some of the due diligence you would otherwise need to go through and just get used to putting your money to work.

With that said, part of learning to invest as an angel is by going through the pain of sourcing and vetting a deal.

In my opinion, you should balance out investing as part of a group with finding the sort of deals that really interest you for yourself.

As a side note, I have FOMO’d myself into investing in a deal through a syndicate that was neither in my core thesis nor something I was particularly excited about.

That business, sadly, was not able to build traction and raise again despite the best efforts of the founders. The lesson for me was not to rely on syndicates unless I had also allowed it to pass the gut check on my own thesis and framework.

Crowdfunding Platforms
An extension (or maybe a precursor?) to syndicates, is investing through a crowdfunding platform like Seedrs or Crowdcube. Be wary though, the types of deals that come onto platform can fall into a couple of categories that may not suit your needs - either they are using crowdfunding as a proxy for marketing or they have struggled to raise externally already (bear in mind there is quite a lot of heavy lifting involved in trying to raise on one of these sites).

I personally use them to teach my kids about investing and we throw £100 or so into a deal from time to time, but I wouldn’t use them to source (many) deals I am really interested in investing in.

Diligence
Having found a deal that might be interesting, what next? Well this is where things at the early stage get fairly murky.

There is usually not much data to go on so you cannot perform a DCF or some other traction based framework to figure out whether a deal is worth investing in.

For me, over the short period I’ve been angel investing, I’ve narrowed down my final decision to the following:

1. Do I WANT to invest? (i.e. is this a product / service I really believe in).

2. Is there a sufficiently large market?

3. Do I think the founder can execute in that market?

(Tangentially, I also think about whether I can be valuable beyond - or maybe given - my small cheque).

At the earlier stages, so much of what you’re going to invest in is an unknown, so there is limited diligence you can really do. But here’s some examples:

• Interview users or customers if relevant

• Try the tech out yourself (assuming it’s a tech product)

• Check if there are competitors in the space

• Talk to other investors

Terms
If you’re investing £1 - 2k cheques, you’re going to follow the terms that have been already set by the founder or a lead - no point trying to argue on this, though, you may consider whether coming in with a small cheque at a huge valuation makes sense.

Often at this level of cheque size, you’ll be investing with SEIS or EIS on the table and under an ASA (Advance Subscription Agreement) if you’re in the UK, so it’s unlikely you’ll be able to influence terms too much in any case.

Cadence
As I mentioned earlier, if you’re investing small cheques and have budgeted an amount you want to invest every year, you need to be pretty stringent with yourself around how many deals you invest in and over what period.

It’s pointless investing in 3 deals in one month for example, if that means you’re going to potentially miss out on something exciting a few months later (unless those deals are really 💥).

Post Investment
It is worth remembering that, if you are able to, it is always good to continue to add value to a founder - even if that’s just checking in to see how they are - on a regular (but not naggingly!) basis.

Founders talk to each other, and if they have found you, your advice, network and support valuable, that’s a great way to increase the deal flow coming to you.

Wrapping it up
Whatever advice I can give on the matter, I’m still learning myself so I have no doubt that my approach and understanding will morph and change over time.

The best piece of advice I can really give is to just get started - start talking to founders, looking at decks, joining angel groups or syndicates and, most importantly putting money to work.

If you’re just getting started as an angel, I’d love to understand what your experience has been - drop me a note on LinkedIn or reply to this mail 💪