How I angel invest and what it means to me

In November 2018, Atomico started its Angel Programme, which I am leading with my colleague Will Dufton. Each year, we’re letting 12 outstanding individuals from across the European tech ecosystem invest $100K.

Given that 93% of the funding in Europe last year went to all-male founding teams, it’s obvious that capital is not being allocated in a way that reflects our society or encourages a broader set of people to become entrepreneurs. And that’s just gender — diversity of all kinds is lacking in our ecosystem. That’s why we hope the angel program will activate a new generation of angel investors and tap into underrepresented founder groups.

A half-year in, the program has sparked deep discussions among the angels and generated learnings and insights. We want to share those insights here with the hope that they will inspire and inform potential angels, current angels, and founders alike.

As the head of the angel program, I want to kick off this series by sharing about my own experience being an angel. I have been angel investing since 2012 while at and after spending 8 years at Spotify and have backed 34 companies.

Why do I do it?

Simply defined, a business angel is according to wikipedia “An angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. Angel investors usually give support to start-ups at the initial moments and when most investors are not prepared to back them.”

For me, angel investing is four things.

1. A way to put my money to better use (and hopefully better returns) than letting it sit in a bank account or buy expensive things we don’t need
2. A way to give back to the community by sharing my learnings, insight, feedback, and a good dose of encouragement on the tough days. I know how intense it is to be on a start-up journey!
3. A way to continue to learn, especially about how things are being dealt with operationally today by the best in the industry. This helps me keep my knowledge up-to-date. Partnering with founders gives me much more than a financial reward, I also receive rewarding conversations, positive energy, and meaningful relationships and many times the best deal flow comes from the founders I have backed.
4. A way to contribute to improving the lives of others and dramatically reshaping the world. I want to back founders who are making a positive impact on our entire world, and I am so happy that I can enable that change.

How does it work?

First, you have to define what you can bring to the table as an angel. What value can you bring to founders?

In my case that is advice and insights about marketing, brand building, communications strategy, building culture and international expansion because those are the things I have spent my career doing. The best founders often have many people offering them money and being clear with them about your value-add as an angel will help them make a decision about which investors to partner with.

Second, you have to set your investment principles. Here is a list of my principles:

• I want to invest in founders based geographically close to me so that I can meet face to face with them regularly
• I prefer to back female founders but it is not a must
• I like consumer ideas more than enterprise
• I like to co-invest with other investors that I respect
• I’m not investing if the founders aren’t still involved
• I don’t want to invest if the founders aren’t full-time dedicated
• I will not invest if the cap table is unequal or there are investors who are not adding value but own a significant part of the business or if the founder does not own a meaningful stake of his/hers own business
• I am not looking to invest in big rounds, but angel or seed stage opportunities

Third, you have to secure deal flow. In my experience, I met with interesting founders simply because I was a part of the tech and start-up ecosystem, and I know the same is true for our angels. Finding your peers and being valuable to people in your surroundings can also create network effects and generate deal flow. I meet a lot of founders with interesting businesses that might not be right for me but for other angels in my network and I try and connect the dots and make the intro’s so Im even if I’m not investing Im able to bring value through connecting founders and angels and funds to each other.

What am I looking for in a founder and a company?

Now that I have met with hundreds of founders, I find that I have also developed a kind of internal sense of which kinds of founders I am looking for. The kind of founders I want to back:

• Have strong drive, big ambition, and clear conviction
• Are disciplined and mission driven
• Have relevant experience that have led them to the insight that there is an opportunity where they are building a company and are passionate about that opportunity
• Are great at telling their story in a compelling way (you need to be great at communicating your vision clearly if you are hiring top talent and when raising capital)
• Attract top talent and hire people that are smarter than them
• Are patient and committed to work 24/7 for 10 years more or less
• Have a clear moral compass since they will be faced with difficult situations where they need to make hard decisions fast. They need to have a moral framework or core set of principles they can draw on
• It is also a plus if founders have experience building a company before, have spent time thinking about the learnings from that experience, and have developed strong relationships with operators and investors

I also have an internal checklist of things I look for in a company when I am investing. Those are based off my investment principles and also common sense about what makes a business successful. Those things are:

• The product solves an obvious problem and is tech enabled
• The team is obsessed with creating an outstanding user experience
• There is momentum in the market and other trends that confirm or add to the need for this product
• Strong potential for meaningful partnerships
• The size of the total addressable market
• My view of how the future behaviour of consumers is aligned the founder
• Is this a company that has the capability to have an impact on society and become a big, global player?
• Is the team the right team of people that I believe will be able to do this?

Even if a founder and a company check all those boxes for me, it’s never just me choosing a founder. In the end, the entrepreneur and the investor must choose each other. And that relationship clicks when we’re both excited about the same things, share the same values, dreams and passions.

Things I wish I had thought about in the beginning

1. Don’t spend too much too fast. In the beginning I was so eager and excited and therefore more “trigger happy” (for lack of a better word) and I wrote bigger checks than I do today mainly because I hadn’t thought about follow on rounds (in other words, another round of financing) and realized how many interesting investment opportunities in start up’s there is out there.
2. Decide if you want to be able to do follow on rounds and if so, set aside money for it. When one of your companies is doing really well, it’s great to be able to participate in the next round as well. At the same time it will be more expensive, so think about how you want to allocate your money.
3. Invest in founders close to you geographically. I’ve noticed I’m most excited about the founders where I have an opportunity to develop a deeper relationship and that’s easier if I can meet up with the team regularly. This lead me to the conclusion that it’s better to invest in the regions where I spend most of my time and have a strong network so I can be of help in a meaningful way.

In conclusion…

Angel investing is a learning process, but having a set of fundamental principles that play to your strengths as an investor can help you bring the most value to your partnerships with founders.

Some of my investments include companies like personalised learning company Sana Labs, food waste fighting company Karma, insurtech company Hedvig, well-being platform for men called Manual and femtech company Daye. I am especially interested in femtech at the moment. There’s so much to be done in this field and I’m very excited to follow the femtech space more closely.

Looking to share more learnings from the Atomico angel program in the weeks and months ahead.