How an Angel Investor size up a Start-Up
This has been a busy but exciting year.
As an Angel Investor, I have been sniffing around for opportunities across businesses in areas like F&B, grocery retailers, import/export and technology IPs. My core attention is start-ups, preferring founders who are commercially aware about trends and drivers, who have a deeper thought for things and issues around the world. This will lead them to think clearly about creating a product or service that disrupts/provide diversion from traditional processes yet be able to offer originality and value to their target audience. Therefore, it’s not just solving problems only; it’s not about social good but to make sure your 3Ps are there - pragmatic, profitability and positioning. Positioning in the right consumer or enterprise segment before strengthening the core attributes. At least, the business has to earn a decent $1 net profit after the breakeven point.
Meaning, sustainability comes first. Don’t even think of capturing market share. Your business has to float in treacherous waters.
Start-ups should ask themselves 5 key questions first:
1. How can your product/service be so uniquely different from 3 of your competitors?
2. What will you do if you don’t earn a profit after a specific period of time?
3. Why do you personally envision that there is a demand in the market? Forget external data!
4. Give a detailed successful example of how you manage to turn something around in life
5. How robust do you think your revenue model is?
Very often, I see start-ups compile charts of secondary research that point to burgeoning market potential. But that’s what the experts say, NOT you as the founder. If the founder has the capability to literally articulate why the market is untapped, what causes the market size to grow in your opinion – this is what I will be looking out for. The train of thoughts - not the usual market reports.
I am glad to sit through investor presentations where enthusiastic young folks talk about their ideas, the bright minds who aspire to make an impact. Angel-based associations such as BANSEA provide a great platform. Usually it's "by-invitation" closed network. It’s interesting to hear a start-up from South Korea and another from Taiwan. Though the early starters may lack business skills and real-life experiences, I am sure they will blossom with the right mentorship and the right attitude. That’s where I come in to provide guidance from a strategic and business development perspective. I help them identify new areas to grow and to help develop strategic and tactical ways capturing market share. This usually applies after Series A funding round.
What this translates to start-ups is to seriously think about the specific help they require. For example, if they lack a Deal-Maker who truly understands the industry dynamics, they have to search for a suitable Mentor to fill in the gap. Angel Investors doesn't just provide the fund, they are looking at a holistic way of supporting the founders. And the founders have to be open in their thinking and directly communicate their purpose. Usually, this takes several rounds of coffee to get ground up rapport between parties. Hence, anticipating the expectation of an Angel Investor is vital.
Having said that, I do encourage majority of the fresh school leavers in Singapore get a job and work for multinationals or if not, SMEs. Learn on the job, pick up skills, grow personally and build your network. Don’t think of entrepreneurship. It’s not exciting; it’s hard work (yes tough!). And because of this reason, 1 out of 30 start-ups will catch most investors’ attention – simply because the shortlisted candidate has worked in the business world for a number of years. Therefore, they know how to handle processes, are commercially aware, able to anticipate opportunities and craft their plans around the firm’s allocated resources.
For this reason, I am vested into a Start-Up based out of Singapore. They are right after the seed round funding. Not just being a passive investor but I do fly out of Singapore to discuss and work out actionable growth plans and strategic initiatives. I foresee myself getting deeply involved with other potential start-ups.
Technology has certainly open up new realms of opportunities. In 2018, I will continue to build my stakes in private equities. So, there will be an equity portfolio of public-listed and private firms. The process has been exhilarating for me, it’s enjoyable and I am able to transfer my business knowhow to start-ups. The mutual collaboration is part of the journey. And the end goal is to witness the success of the start-ups. Of course, there is the lucrative exit route. So, that’s one of my investment plans, as part of the “Project Silver Milestone”
How about you? What’s your little new venture?
Thanks for reading!