The Angel investor Masterclass was targeted toward those interested in early stage investing and the level of engagement in the forums was exceptional. There were two events; a morning session where angel investors in the Viktoria Ventures network got coaching from Brigitte Baumann, President Emeritus of the European Business Angel Network. It focused on a case study of an angel investor-start up deal.
The afternoon session, that is, the masterclass, saw an array of people from various backgrounds attend. Borrowing a leaf from Bridgett, participants were encouraged not to view angel investing as just a hobby. Making the kind of returns angels expect can only come through investing not just money but time, knowledge and sharing of business networks. Participants were enlightened on how to professionalize angel investing by learning its different aspects such as valuation, deal structuring and negotiations. An angel could also gain better returns from receiving training from someone whose approach on angel investing has been tried and tested.
Group angel investing
Stephen Gugu, the co-founder of Viktoria Ventures, highlighted group investing as one of the key takeaways from Bridgette’s masterclass. Some of the advantages include:
- Investors can work together and help an early stage company according to their areas of strength.
- Investing in small amounts reduces risk in cases where a substantial amount of investment is required.
- Small companies prefer working with a group of investors as opposed to several investors to avoid having many separate consultations when they need to transact.
- When investing, one requires money for four rounds of investment – a cycle of two to five years. Investing in a group gives you this opportunity as an individual investing often means that money is depleted in the first round.
While there are many advantages, it is also important to know who you are investing with due to varied interests. One may want to exit, another thinks the business will pick up… a similar vision is important to avoid the wrangles often seen among investors in any area.
Our own Keziah Njeri was part of the panelist during the masterclass as well as Martin Kiilu, a specialist in impact investing, Robert Yawe, a coach working with start-ups and jasper Grosskurth from a research firm. Participants got a well-rounded understanding of the many aspects of angel investing including a view of the start-up ecosystem and fundraising for the early stage businesses.
The panelists did have quite the task trying to convince people to join the angel network by demystifying various aspects of early stage investment. This is because people are risk averse and have been investing in real estate and the stock exchange.
Interested local investors need to become comfortable with the level of risk that early stage businesses pose. Good businesses that could be successful and bring desirable returns are suffering due to protracted hesitance.
The recurring topic of foreign investors putting more in early stage companies than local investors came up. There was also emphasis on the need for angels to roll up their sleeves and get involved with companies as most people lose money from lack of engagement with these businesses. Prospective investors also need to understand that it’s not just about the money, they could also be part of an advisory team, offering coaching, mentorship and making business introductions.
Bridgette proposed webinars to build the angel network, showing those in the room a bit on what they stand to gain from topics like valuation, exits, negotiate and co-invest among others. To subscribe to our mailing list for more information on this and more, please email email@example.com or SMS your name and email address to 0735 639 921.
We asked the participants to share with us their views on the masterclass and the feedback was quite promising, a trend we hope will continue. A majority sighted learning more about angel investing and understanding the investment logic as the reason to attend.
What was noted as well was that a lot more parties would be interested in angel investing if they had full understanding of what it entailed and how to go about it. Some in attendance were already investing between USD 10,000 – 100,000 annually, and the masterclass provided them with the opportunity to better understand the ecosystem and how to scale up their current efforts.
With other investment options in play, Stephen offers an answer to the future of angel investing from an article by How We Made it in Africa:
“I think that most people get convinced more by the returns discussion. Everything, even the real estate boom that we are seeing right now, is about being patient. There was a time when there was not much real estate investment. If you go back to the early and mid-2000s, in Kenya [buying] shares [was popular] and this was because of the listing of some prominent companies. We just need to get to that tilting point then many more people will join. We need more success stories that demonstrate how people have made returns [through angel investing].”
ABAN helps form angel groups, creating training opportunities such as the masterclass and also provides linkages with other angel groups to share experiences with. Lions Africa was the first sponsors of the Nairobi event.
Upcoming post: Dr. Jasper Grosskurth, Managing Director of Research Solutions Africa, and a board member of VC4Africa findings from the Venture Finance in Africa 2016 report highlighting the performance of early stage, high growth ventures and the activity of early stage investors in Africa.