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Becoming an Angel Investor - your guide from A to Z

Angel investors are one of the most important and impactful investors, especially in the early-stages of a startup.

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You’re ready to take the leap and become an angel investor, but you have no idea how to make your first steps. You look at a few startups, counting how much you would invest in each and the main reasons you would do that. However, you still find some missing pieces you have to figure out.

Lucky for you: You don’t have to struggle with searching the information all by yourself around the web, full of different sources, out of which is difficult to see which has the best quality.

Before going forward, it’s essential to take a moment and draw what the meaning of an angel investor is. According to our glossary of key investment terms, angel investors are independent private investors who aim to finance and support businesses they believe in. They are one of the most important and impactful investors, especially in the early stages of a startup.

An angel investor is an essential resource in the life of a growing startup because they provide seed capital and bring their expertise and knowledge to the table. They come with an external perspective and stay close while guiding founders to grow their business and take better decisions along this journey. The main characteristics that define a business angel are:

  • Invest in the early stages of a startup.
  • Invest more than a day-to-day investor and less than a VC (minimum 100K EUR per ticket).
  • Invest their own money and are actively supporting the founders with network and expertise.
  • Expect ROI to come later in the future (5-10 years).
  • Take equity or a share of the company’s revenue stream.
  • Have a personal decision-making process for funding decisions.
  • Strive for impact - they look to foster innovation and support economic growth.

Becoming an angel investor 101 - Essential steps to follow

Starting the journey to become an angel investor is a personal experience for each individual, even though there are a few essential steps to guide yourself. Each person has a different background, resources, and knowledge they can build upon.

1. Funding resources for angel investors

People who seek to follow this path generally invest their own money and personal savings and act as an individual at first.

The world of angel investing doesn’t have a straightforward recipe stating how much money you need when looking for your first deals. It mostly depends on how you start, where you start looking for potential startups, as some of them may require more or less. A minimum ticket started at 10K EUR in the past, but with angel syndicates and crowd investing (like SeedBlink), you can start with lower amounts.

Read a dedicated ebook on startup funding with insights from 50+ European investors, who shared tips & tricks on what you can do when just starting.

2. Key things to consider before investing

According to top European angel investors and VCs, there are some key elements to look for in a startup and its founders before going for the final funding decision. The main categories to focus on in this process are:

  • Founders & Team.
  • Business & Growth.
  • Product.
  • Investment terms.

On SeedBlink’s funding guide, you can learn about all these factors more in-depth, with real insights from the local community. Download SeedBlink’s ebook on how startup investing works - a guide with insightful tips and tricks from investors.

3. Core types of involvement for an angel investor

If you think you require a specific set of skills or knowledge about becoming an angel investor, we have good news. Anyone can be an angel investor.

A growing business needs support in different areas where angel investors can bring their expertise. This is the moment they can take a dedicated hat on, besides coaching founders in guiding them to grow and scale the business.

  • Connector - An angel investor connected to the startup community will help founders connect with other key players or find the right talent needed for the company.
  • Mentor or advisor - Besides the actual investment, you can help founders make business decisions and provide guidance for the next steps needed.
  • Growth Manager - If you have previous marketing or sales experience, you can help prioritize campaigns or establish more precise tactics to scale day to day operations.
  • Technical Expert - An angel investor with a technical background might impact product development backlog for upcoming feature development or existing features that need improvements.
  • Board Member - Help the CEO or executive director in running day-to-day operations.
  • Stay just as a source of capital - You bring the money to the table and let them figure it out.

4. How to diversify your portfolio as an angel investor

Don’t put all your eggs in one basket.

Said a wise man once, and investors are keen to follow this piece of advice to avoid the risk of losing their capital. Diversification of the investment is a risk management technique by which investors allocate their money across several different asset classes, geographies and industry sectors to spread their risk exposure.

There are many types of portfolio diversification, and you can learn more about it alongside a set of recommendations and tips and tricks right from investors here.

What motivates angel investors to invest in startups

As human beings, we are motivated by different actions, stories, and ambitions, and as mentioned earlier, each journey when you become an angel investor is different.

Helping startup founders make their first steps to grow their business is a common target that we saw in SeedBlink’s community. However, we wanted to understand better what’s behind this generic feeling, so we asked a few investors what’s the real motivation behind their actions:

  • “To bring change and innovation to a world that is gradually losing its ethical principles and the sense of life itself.” - said Dimitris Matsakis, an angel investor from Greece.
  • “I am motivated by the idea of being part of a success story. Each of us now wants to be part of the next UiPath.” - said Victor Bica, an angel investor from Romania
  • "Investing means believing in the future and joining a team that I enjoy working with." - said Dragos Anastasiu, an angel investor from Romania
  • “I’ve started investing because I believed in the potential of several projects, in their ability to disrupt the future, but also because I wanted to meet like-minded people with a creative vision, to be close to them, and to learn, firsthand, what it takes to shape tomorrow by launching, today, game-changing products and services.” - said Mihai Ivascu, an angel investor from Romania
  • “The idea of being part of something right from the beginning, and hopefully being successful, eventually.” - said Utku Ogrendil, an angel investor from Romania.
  • “I have been working with startups for 15 years now. I think this is a wonderful way to “give back” after a successful career: providing money (a little) and support (a lot of it!) to help a group of founders build a winning venture is a powerful way to end your working life. And you get to know a lot of like-minded people with whom you can build long-lasting friendships." - said Fausta Pavesio, an angel investor from Italy.

Advantages and disadvantages of becoming an angel investor

Angel investors fill in the gap between bootstrapping and VC funds, where very early stage companies are not attractive for significant venture capital funds or larger financial institutions.

In the early days of being an investor, you might want to consider looking at both sides of this journey and see if this is the right thing for you.

Advantages of angel investing

  • Community connections - If you have previously worked in the industry in which you wish to invest, most probably, you already have a pool of contacts that you can reach out to. Through these connections, you can support founders, connect them with new customers, or partners.
  • Knowledge - Similar to connections, with a previous in-depth experience, you know how the market is moving and how to coach founders to succeed in a constantly changing landscape.
  • Company of one - You have more flexibility to do your research, build your process, and make your final investment decision because it’s all up to you. You are not tied to any other organization, only if you are part of a local angels club or a similar group.
  • Flexible role - You are free to become more than financial support for a startup and step up as a lead for a specific department to help them scale faster.

Disadvantages of angel investing

  • High uncertainty - You present your ROI expectations before going for the investment process, and a startup works to prove how it’ll make it happen. However, there is no guarantee that they’ll also succeed, and in case of failure, you don’t get the chance to take your money back.
  • Portfolio risks - If you have a small amount of money to invest and you can’t allocate more to build a diversified portfolio, it might be a hit or miss if you channel everything into one direction.
  • Time & effort - If you decide to go alone on this journey, the process will require more paperwork from you along the way, which takes both times & effort to get done. However, if you don’t do that, you can always join a syndicate group of angel investors, such as SeedBlink, and simplify your process.

Angel investor vs. VC

To avoid potential risks, both venture capitalists and angel investors are people who invest money into businesses and think twice before putting their money on the table. However, different other characteristics make them stand out on their own.

Compared to an angel investor, a venture capitalist is a person or firm that invests money from external sources, such as investment companies, large corporations, and pension funds, and not personal money. Additionally, venture capitalists focus on the later stages of the businesses.

Helpful resources to become an angel investor

There are many resources available from educational articles, courses, podcasts, and books, but nothing compares to talking with a real investor. This is one of the reasons why we brought real insights from active European investors in our community and a list of places where you can find them.

“There are some books that could be of help, such as “Venture Deals” by Brad Feld & Jason Mendelson or “Mastering the VC Game” by Jeff Bussgang, but that is just the start of it.

_What you need, in my opinion, is to meet and talk with other investors, tag some of their investments and learn by doing. A great way to do that is by joining an Angels club or participating in deals on platforms such as Seedblink._” recommendsYavor Gochev, Sr. Investment Manager, at Innovation Capital

Tips & tricks from European angel investors

Define your investment thesis

A clear investment thesis brings clarity on our strategy and day to day actions, and Alexandru Lupascu, an active investor on SeedBlink, recommends we focus on defining it in our early days.

“Without a clear investment thesis, you are prone to making emotional decisions. I learned that preemptive rights are critical because they allow you to double invest in companies that have a higher probability of success.”

Have patience and focus on your education

******Sabin Galceava**, an angel investor from Romania, advises us to make the process slower and focus from startup prospecting to investing in our education as angel investors.

“This world is very dynamic; it’s constantly evolving - you have to keep up with it. The investment is not short-term - it may take ten years to see the results. If you can not wait, look for other ways to diversify your investment. Opt to invest with others first, partnered with Business Angels (e.g. TechAngels, TAN, Growceanu) or as investment platforms (e.g. SeedBlink). You can learn a lot from more experienced investors, and they can guide you in the investment process.”

Know your limits

A clear investment thesis will help you understand where to focus and make you think about your finances and how much you want to invest. Romanian angel investor Victor Bica highlights this too: “Given the high risk and startup success rates statistics, invest only the money you can afford to lose.”

TOP: European Angel investment platforms & clubs

_“It’s really simple. Don’t do this alone unless you’re prepared to take on a full-time job as a professional business angel, and you love to take on the extra risk. Otherwise, find like-minded people - as long as they are not too like-minded because there’s strength in diversity.”_ recommends us, Ciprian Man.

If we continue with Ciprian’s advice in mind, then it’s time to look beyond the logistics and see where we can find support for growing as an angel investor and building a high-performance portfolio.

So, let’s take a moment to get to know some of the most crucial European angel networks, angel clubs, or investment platforms that gathered thousands of angel investors throughout the year.
******SeedBlink** - SeedBlink is the largest community of active investors in tech startups in Europe. Launched in January 2020, SeedBlink is the fastest growing investing platform specialized in sourcing, vetting, financing, and scaling European tech startups.
******BAE - Business Angels Europe -** The European Confederation of Angel Investing represents the European Business Angels’ Federations and Trade associations in Europe. BAE brings together the most active and developed countries operating in the angel market in Europe.
******COBIN Angels** (Poland) - The largest professional club of business angels in Poland, started in 2015, is a constant supporter of private investors in making investments in young, fast-growing technology companies from Poland and the Central European region. COBIN brings together business owners, board members and top managers. Over the past five years, COBIN Angels members have concluded several dozen transactions under which, in addition to financial investments, they support the development of startups with their knowledge, experience and relationships.
******CBAA - The Czech Business Angel Association** (The Czech Republic) - is the national association connecting angel investors in the Czech Republic and representing their interests. Along with our members, we build a vibrant investment climate that follows high professional standards and ethical principles.
******Tech Angels** (Romania) - The business angel group in Romania has been actively contributing to the development of tech businesses from Romania and South-Eastern Europe through investment, expertise, and connections since 2013.
**HUNBAN - Hungarian Business Angel Network **(Hungary) - Hungary’s official angel investor association started in 2017 with the core goal of uniting all business angels interested in investment opportunities not only locally but on a regional level. Additionally, HUNBAN wants to integrate Hungary into the international circulation of business angels and truly represents both companies and the investors’ interests.
******CRANE - Croatian Business Angels Network** (Croatia) - is the oldest business angels non-profit organization in the country that brings together private and institutional investors interested in investing in innovative companies at an early stage of development. The association was launched in 2008 by a joint initiative of several institutions and well-known investors.
******ABAS - Association of Business Angels of Serbia** (Serbia) - A non-profit organization launched by private investors who want to nurture more private investments and whose core activity consists of matchmaking between startups and investors, sharing best practices and representation of the private investors’ interest.
******HEBAN - Hellenic Business Angels Network** (Greece) - The Hellenic Business Angels Network (HeBAN) has been established as a national, non-profit organization in response to a gap in the Greek entrepreneurial ecosystem of providing sufficient funding and expertise to innovative startups in their early stages.
******BANA - The Business Angels Network of Armenia** (Armenia) - BANA is the premier angel network providing a platform for investors to meet and cooperate with their peers and connect them with promising startups and entrepreneurs.
******Business Angels Group of Slovenia** (Slovenia) - Started in 2007, the Slovenian group is the country’s first and biggest angel investors club, providing a common point between startups, companies, club members, and international investors and experts in the field.
******Latvian Business Angel Network** (Latvia) - An independent association founded in 2014 focused on extending and developing the network of angel investors in Latvia by supporting new projects.
******DanBAN - Danish Business Angels Group** (Denmark) - Denmark’s most substantial business angel network consists of 300 private investors who invest in startups nationally and internationally, starting from 2019. DanBAN holds many meetings during the year, including member meetings, study trips, theme meetings, business angel educations, and monthly pitch events, where selected capital-seeking companies can apply to present their business case and increase the chance of investment.
******FiBAN - Finnish Business Angels Network** (Finland) - is a Finnish non-profit association of private investors and one of the largest and most active business angel networks in Europe with 650+ approved members.
******AWS - Austria WirtschaftsService** (Austria) - The Business Angels Group has provided Austria’s most important, independent and nationwide National Angels Matching Service since 1997 between equity-seeking companies (startups and existing SMEs) and business angels.
******BAND - The Business Angel Network of Deutschland** (Germany) - BAND is the first angel federation in Europe, starting in 1998. As the national association of the angel investment market with more than 50 member organizations, BAND is the speaker of the German Business Angels and Business Angel networks towards politicians and the public. All in all, BAND represents the German angel market with about 7,500 angels investing € 650m per year.
******BANN - The Business Angels Netwerken Nederland** (Netherland) - BANN is the Dutch federation of business angels networks and has 33 business angels networks as full members, representing around 6.000 business angels. BANN estimates that the Dutch business angels market has an investment size between €150-200 million per year, with BANN representing 30% of this market.
******The Belgian Business Angels Network** (Belgium) - The Belgian BAN market has been consolidated into two major networks covering the whole country: BeAngels and BAN Vlaanderen. The two networks together count more than 450 business angels. In 2017, their members accounted for more than €7,5 million in investments.
******France Angels** (France) - France Angels represents 70 BA Networks. It has three core goals: promote investment by Business Angels in France, represent the Business Angels with French and European public and private institutions, and federate Business Angels and professionalize their action by promoting the exchange of “good practices”,
******IBAN - The Italian Business Angel Network** (Italy) - IBAN was founded in March 1999 in a project launched by the European Commission – DG Enterprise. Today IBAN is a strong organization that associates BANs with more than 450 Business Angels across Italy. In 2017, its members invested more than 19 million EUR in 117 deals.
******APBA - Associacao Portuguesa Business Angels** (Portugal) - Formed in 2006, APBA represents the two main Portuguese business angels networks and 12 investment vehicles. With more than 150 business angels, APBA screens more than 100 deals per year and its members have an investment commitment of around €5,9 million for 2017-2018.
******AEBAN - Associacion Espanol Business Angels** (Spain) - Formed in 2008, AEBAN now represents 40 Spanish Business Angels Networks, 2000 angels from all regions. Since 2014 AEBAN has reunited in working groups with individual and relevant business angels and other instructions active in the early-stage market.

After reading this guide, explore some of the active investment opportunities here on SeedBlink and join us and the biggest community of European tech-investors!

By Patricia Borlovan

PublishedMarch 08, 2022


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