The Myth of Quick Decisions🔗

One of the most commonly-held misconceptions about angel investors is that they make swift investment decisions, often based on a single pitch or meeting. People watch too many Dragons Den without realising whilst it’s great TV, it’s poor business.

In reality, securing angel investment is typically a lengthy process. Founders may need to engage in over 100 calls and meetings before successfully raising the funds they require. This process can span several months, involving multiple conversations, follow-up meetings, and thorough due diligence.

Why the misconception?🔗

Unlike venture capital firms, angels often lack the formal decision-making structures, investment committees, and strict calendar commitments that characterise institutional investors. This informality can be misleading, as it might suggest a more rapid decision-making process. However, many angel investors, particularly those who aren't full-time investors, may actually take longer to reach a decision. They often enjoy the flexibility they've earned and may not feel pressured to make quick choices.

Many angel investors, especially in Europe, have extensive experience in building, scaling, and exiting businesses. They intimately understand the challenges of entrepreneurship and the rarity of true success. As a result, they often approach investment opportunities with a healthy dose of scepticism. It can be true they are less disciplined in how they think about investing which can lead to valuations that are too large - but that’s another discussion.

The reality of angel scrutiny🔗

Angels frequently conduct due diligence, albeit perhaps less formally than VC firms. They assess not only the business idea but also the founder's passion, vision, and ability to execute. Their personal experience in the business world often makes them astute judges of character and potential.

The Silent Partner Myth🔗

Some founders mistakenly believe that angel investors will act as silent partners, providing capital without involvement in the business. In reality, many angel investors expect to play an active role in the startups they back. They’ve built their business, they’ve exited and they’re genuinely looking to get their teeth stuck in again.

Active involvement and mentorship🔗

Angel investors often take a hands-on approach, offering guidance, mentorship, and leveraging their networks to assist the startup. Their involvement is typically more personal than that of VCs and can be crucial in the early stages of a business.

The Venture Capital Comparison🔗

It's important to understand that angel investors and VCs operate differently. While both aim to invest in high-potential startups, their approaches, resources, and expectations can vary significantly.

Investment size and timing🔗

Angel investors typically provide smaller amounts of capital, ranging from a few thousand to a few million pounds, often during the seed or concept stage. VCs, on the other hand, tend to invest larger sums in later stages when startups have demonstrated market traction.

Decision-making process🔗

Angel investors' decision-making is often more personal and subjective, relying heavily on their judgment and the entrepreneur's vision. Venture capital firms usually have a more structured, rigorous process involving detailed market analysis and team assessments.

The Myth of Unlimited Wealth🔗

Television and media have perpetuated the image of angel investors as ultra-wealthy individuals with unlimited funds to invest. While some high-profile angels like Mark Cuban or Ashton Kutcher have substantial investment portfolios, they are the exception rather than the rule.

The reality of angel finances🔗

Many angel investors are professionals with regular jobs who have some extra capital to invest. A survey conducted by the Angel Investment Network revealed that over 50% of angels invest less than £25,000 per startup on average – a figure much lower than most founders might expect.