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Where are all the Angels?

My business is in the AI/chatbots space where we are creating a platform and service offering to both rapidly create, integrate and optimise chatbots for enterprise customer service applications.

The interest that we're getting from the investment community is huge, only not the part of the community that we're trying to reach. We're continually getting inbound interest from major VC funds wanting us to pitch and when we do we're politely told to come back when we're a little further as we're still prototyping.

We have in our founding team over a decade of experience in data science and digital product design, so the pedigree in the team is there. We've validated our proposition thoroughly by building a healthy pipeline of prospective clients, most of which we're having to walk away from because we're not quite ready with the tech yet.

I also regularly hear from these people that there are plenty of angels out there who will invest in a hot idea like this (seeing as we're only looking for a ticket of $250k to $500k to accelerate the product development)

However, I can't seem to be able to unearth these Angels. I've been networking furiously in Berlin and London (we're European-based) and in the latter we've even been told by one Angel network that we're not far enough along (we're due to complete our prototype in October).

These Angel networks seem heavily gated and appear to behave more like venture capital, which begs the question: where are all the angels? These supposedly minted individuals looking to back founders with big ideas. I hear a lot about them, I'm yet to see one in the flesh...

16 Replies

Alejandro Cremades
6
0
CoFounder & Executive Chairman at Onevest
The real interest comes from investors that wire the funds into your bank account. Otherwise it might mean interest in your specific market and not necessarily your company.

A good example of the above, is when you are getting inbound emails from associates or analysts at a Venture Capital firm. These folks are for the most part tasked by the partners to scout the space for data to form their investment thesis or because they are looking at investing in one of your competitors.

As you very well stated, the background of the team is critical. Like author Jim Collins states, a startup is ultimately a bus without direction. If you have the right people on the right seats of the bus it will eventually find the right direction towards success. With this in mind, by having this front covered you will be checking one of the critical boxes to get the investor excited.

The other critical component is the market in which you are executing as that will eventually determine the potential exit of the investor. You may have a great team but if the market is really small it may turn off some of these folks.

You may not have the tech ready, but it would be great if you could get some form of initial non-binding commitment from these potential customers (e.g. Letter of Intent) that you could later use to show your momentum to some of these investors as the conversations advance. Don't just walk away from them!

Like you cite, there are a lot of angels out there. Those are not the ones that call themselves "angel investors" on LinkedIn (these are from my experience the $2,000 ticket size types), but the senior executives at large corporations or entrepreneurs that had an exit with a previous venture that are looking to allocate between 5% - 8% of their portfolio to risky investments.

Please note it is not a matter of getting in front of the angels, it is all about knowing the strategy and the psychology required in order to enroll them with your future vision. Fundraising comes down to addressing concerns from the investor but it requires a masterful execution from A to Z.

In order to get things in motion with your financing round you will need one of the following things:

1) A lead investor

2) A syndicate

The first option is the challenging one. This lead investor will be establishing the terms of your round (e.g. valuation, term sheet, etc) where everyone else will be coming in.

Unfortunately not everyone leads and investors are like a sheep. They always follow other investors but not all of them take the charge to put the price and invest in a company. For that reason during the fundraising process try to avoid meeting with followers and invest your time with potential lead investors.

A good strategy to secure a lead investor is to incentivize your potential good candidate with an advisory role so that they get familiar with you and your team and the direction of the business. This way leading your round will come from them automatically.

The second option is putting together a syndicate. You would just put a valuation that is attractive and start generating momentum with a closing date to get people excited to join.

At the end of the day fundraising will depend on the level of FOMO (aka fear of missing out) that investors feel. No one wants to invest in a train that never leaves the station. However, if they feel they might miss the train or the ticket might be more expensive they would do whatever it takes to jump in.

With that being said, to build such urgency shoot for a closing date once you either have the syndicate or the lead in place but don't stick to it. It also helps to align product launches and media mentions praising your business during the fundraising period.

You will be using the updates above for the follow ups every two weeks with the investor (e.g. press mention, product launch, new hire, intro to an interesting entrepreneur that may fir the investment thesis of the investor, etc).

Also never mention that you are fundraising (good job btw on posting this as anonymous!) as the clock starts to tick the minute you do so. For example, if you tell someone that you are fundraising and you go back two months later he/she will think that everyone else rejected you.

With the above in mind, and like the saying goes, you ask for money and you will get advice. You ask for advice and you will get money twice. For that reason start building relationships with investors from day 1.

The best way to get in front of investors is by securing a great introduction. These introductions are really important as investors use the source that is introducing you to vet you.The angel networks are not gated, you just need the right person to invite you to the party...

With this in mind, try to get an intro from an entrepreneur that has made returns to that investor. This info is public on the internet and entrepreneurs are all about paying it forward. Just reach out to connect, tell the portfolio founder your story, and politely ask for an introduction to that specific investor that you'd like to meet.

Hope this helps :)
Peter Bray
1
0
Peter Bray Entrepreneur • Advisor
CEO at Bray & Co
They exist. Firstly I recommend fishing in a different pool. Try Asia and the US. Also make sure you are realistic in your ask, you still are pre-revenue, and many prospective clients love an idea until they had to pay for it. Until the money is in your bank it means nothing sorry to say.
Martin Omansky
2
0
Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
We are a U.S-based angel group. We are not hiding, but are not advertising either. A couple of points: (1) there are very few risk investors; (2) angel investors and VC funds have begun to behaviorally converge; (3) the best bet for you is to ID angel investors who are technically competent to evaluate your idea; (4) no matter what the audience, it is always wise to have something real to show them. My group is more interested in atoms and molecules than electrons. Sent from my iPhone
Joseph Wang
0
0
Joseph Wang Entrepreneur
Chief Science Officer at Bitquant Research Laboratories
Hi there. I'm an angel in the flesh. I think it might help if I tell you the type of investment constraints that I'm under....

1) Generally I only invest in projects in the Pearl River Delta (i.e. Hong Kong and Shenzhen). The reason for this is that I need to be able to talk face to face with the company and walk to the office to see how things are going. OTOH, one thing that the HK government is working on is turning HK into a startup hub, so if you have any interest in moving to HK send me a message via linkedin. If you want to see what's happening in HK with AI, look at OpenCog and Ben Goertzel.

2) My investments are small. I have about USD 300k available to invest, and each investment is typically USD 10k-20k. This means that I either invest in seed stage companies or do a side car investment with an lead investor.

3) My investments are typically convertible notes with 10% coupon and a term of 1-2 years. One reason I only invest in HK/Shenzhen is that I'm familiar with the investment environment, and can tweak my investments for it to make sense here.

4) I typically only invest in high tech, fintech, and mostly software or IoT. I've done biotech. There are lots of cool stuff in fashion, but unless there is a software component that gets me somewhere that I don't know much about.

What you'll typically find with angel investments all have some investment constraints. Angel networks tend to be very local and so it's uncommon for angels to make investments outside their local area.

One project that I'm working on is to use automation to reduce the cost of tracking angel investments so that it becomes feasible for family offices to make these sorts of investments.
Thomas J. Kaled
1
0
Thomas J. Kaled Advisor
Business Development Consultant @ thomas.kaled@gmail.com
Raising capital is a selling function. If you understand your product and how it is competitively superior and it is properly portrayed in a selling document you need to find a buyer. It appears that you have 2 here who have defined their investment conditions and @ Peter Braygives you advice about where to find them. I might suggest you consider Peter's recommendation with 3 (US) and 3 (Asia) groups and if those are not successful revisit your Pitch. Remember that folks who suggest you return when you are 'further along' are possibly offering an objection that you cannot overcome (it is what it is). I would pose the question 'what is the further point at which you would recommend I/we return'?
Natasha Homer-Earley
0
0
Natasha Homer-Earley Entrepreneur
Founder Gujiwo.com
Like you I've also had strong responses from VC's & like you their analyst have crunched the deck & said '' too early, come back when you have traction''. And like you, I'm pre-launch holding very strong market research results & a very strong 'fit for market' prototype. So I sympathize & I am also scratching my head on this one. In my experience Angel Groups are local, like Joseph Wang said. And they and crowd funding sites now operate a 'live in market' criteria. So yes, they operate like VC's these days. I've had a specific challenge that my Startup's home market is China but I'm currently sat in London. So Euro investors won't touch me. I've recently found & onboarded a partner, who although Chinese is based in London with very strong connections into the VC's & banks there. I've been lucky. She believes my Startup will work in China & she's willing to vouch for me, represent me, in opening up talks to investors in China. So I would recommend trying to find a broker, who has a network he can tap into to pitch your idea. It seems like you have enough interest for a broker to consider representing you. You say you have a decade of experience between you in your team. I have 21yrs experience alone in my sector, so that seems low in my opinion. Have you thought about gifting some equity to someone with a high profile in the space your aiming for - maybe a entrepreneur whose got a strong data exit ( to have them as a advisor) ?
Andy Boura
0
0
Andy Boura Entrepreneur
Senior Information Security Architect - Thomson Reuters (Director Secure Product Architecture | CISSP | MPhys )
Based on my research for my own startup and angel investments:

1. FFF Round (friends, family, fools) - gets you product definition, market research, and POC
2. Seed angel round - ?150K under SEIS in the UK - gets you to public beta
3. Follow-on angel / initial traction - Up to ?1m under EIS in the UK - gets you active users and establishes unit economics such as CAC and TLV
4. VC Series A,B,C...growth - ?ms - Growth and scale / market penetration

The risks for the investor reduce at each stage, however the need for big wins increases. I would suggest you look at Seedrs as good pitches at stages 2 and 3 are often funded on there. The thing is ideas and goals are largely worthless. Execution and proven market fit are where the company value lies. So the earlier you take external funds the larger slice of your pie you must give away for the risk adjusted return to appeal to an investor.
James J. Cronin III
0
0
James J. Cronin III Entrepreneur
Compliance Analyst, Malartu
Have you considered crowdfunding? (Reg D: 504/506 or Regulation CF) James J. Cronin III Campbell Law, J.D., 2016 NC State, B.S. Entrepreneurship, 2012 Cell: (919) 946-4465 LinkedIn
Martin Omansky
1
0
Martin Omansky Entrepreneur
Independent Venture Capital & Private Equity Professional
I had high hopes for Crowdfunding, but the Congress promised an elephant and came forth with a mouse. Too bad. Sent from my iPhone
Andy Boura
0
0
Andy Boura Entrepreneur
Senior Information Security Architect - Thomson Reuters (Director Secure Product Architecture | CISSP | MPhys )
Crowd funding in the UK (relevant to the OP) is alive and well. I'm surprised at some of the things that are able to get funded...
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