SUMMARY
An angel investor's role extends far beyond the capital they bring in. It is the intangible, unquantifiable human capital that they bring to the table that can often make or break a startup's success
It is important for investors to maintain an open and collaborative relationship with the founders of the startups in which they invest
This can help to foster a sense of trust and cooperation, increasing the startup's chances of success. After all, a small push in the right direction can be a huge step toward a brighter future
Every investor wants to be a part of the startup growth journey and make 10x or more returns in a short duration. However, even with huge capital inflows, most startups fail. The primary causes of failure are a lack of market need, poor product quality, ignoring customers, being outcompeted, the relevance of the business model, cost/pricing issues, failure to scale, and compliance. The most obvious question investors have is how they can assist startups in addressing these challenges and growing.
Investors invest more in entrepreneurs than ideas when considering angel investments. In the early stages of development, angel backing helps to eliminate uncertainty by endorsing the quality of entrepreneurs. Individuals and institutions use a variety of metrics to understand how their portfolio compares to other segments of the market.
Experience & Industry Connections
It is insufficient for an investor to judge the performance of a portfolio based on a startup’s disruption or a newly launched product in the market. A seasoned angel investor considers many factors before investing, one of which is how to build their portfolio. When actively involved, angel Investors bring in a unique set of strengths that can aid the startup to grow, beyond just the capital.
Many are subject matter experts in their fields, with years of experience and industry connections. As angel investors, they frequently assist founders in leveraging their experience and business connections to explore opportunities. Most investors typically have a portfolio of investments in which they can assist startups in identifying portfolio and network-level synergies and forming alliances to put the startup on an exponential growth path.
Often, investors will invest in startups in the same sector in which they have expertise and will investigate working relationships with any key suppliers to the sector. This can be helpful for the startup as it grows and looks for new opportunities.
A Sounding Board
Adept angel investors often become sparring partners for the founders. They help startups brainstorm, bounce ideas, and seek guidance or mentorship. Many angel investors are successful entrepreneurs themselves and can bring valuable expertise and experience to the table that can be beneficial for a startup. At the end of the day, they help founders realise their true potential and help startups propel growth, sustain it, or course correct depending on market conditions.
Startups have to be nimble and aligned to market dynamics, often pivoting their business models to not only stay relevant but also unlock value. For example, a host of investors could come together to help a B2B business transform into a B2C business, help them with a business plan, roadmap, KRAs, organise the team, build robust customer experience, streamline processes and refine operational inefficiencies and most importantly relay the voice of customers to the management. In short, they not only help protect value but also improve it.
Investors today want to work closely with the founder both before and after the investment. By doing so, investors can help to ensure that the startup is on the right track and has the resources and support it requires to succeed. They seek long-term benefits and attempt to build the company’s goodwill in the market, which will attract more investors to invest, increasing capital inflow. They are an evangelist to the upcoming startup.
For most investors, it is easy to focus only on the valuation of a startup and exit when they have the desired returns, but the journey of an angel investor can be extremely fruitful when they are fully engaged in the startup’s growth journey.
Having this perspective not only drives valuation, but it also creates opportunities to network with like-minded people and develop a holistic view of all aspects of a business, including future fundraising.
It is important for investors to maintain an open and collaborative relationship with the founders of the startups in which they invest. This can help to foster a sense of trust and cooperation, increasing the startup’s chances of success. After all, a small push in the right direction can be a huge step toward a brighter future.
An angel investor’s role extends far beyond the capital they bring in. It is the intangible, unquantifiable human capital that they bring to the table that can often make or break a startup’s success.
