Defining your investment thesis
As you see new opportunities and begin to invest, you will develop a personal filter to help you refine the things you like best.
As an example, here's a draft filter we've written to give you a basis for developing your thesis so you can quickly tell if an opportunity is what you're looking for or not:
- Large market opportunity (more than €500 million exit is expected in about 5 years)
- Preliminary valuation or cap is €10 million or less
- No uncapped notes
- You get preferred shares
- Technology only. Any company where a significant portion of the invested capital is spent on anything other than building and selling hardware or software is not a technology company. Specific categories to avoid: life sciences, medical devices and biotech, pure e-commerce, capital intensive businesses, editorial/media content, consumer packaged goods, businesses with significant platform vulnerability (e.g. applications marketed virally on Facebook or Twitter), heavily offline businesses
Your Commitment as a Business Angel
It can be tempting, especially if you have operational experience, to invest heavily in the companies you support as a business angel. It is not just with money, but with your time, emotions and expertise that you bring value to the companies you invest in. While your advice is valuable at key strategic moments in the life cycle of companies, resist the urge to get too close. You are there to provide capital and advice, as well as help with any reasonable requests that come your way (often these will be in relation to introductions, hiring and fundraising), but do not interfere in the day-to-day life of the business. If a business is not working, the founders need to realise this and fix it quickly. Your help can prolong the inevitable.
If you become a very active business angel, you will have stakes in dozens of companies. You cannot be intimately involved in all of them (nor do the founders want you to be). You should be a supporter, but a passive one. Your day-to-day life should be devoted mainly to your work, assuming you are not a full-time business angel. Concentrate on your participations when you receive updates that require your help or attention. Meanwhile, evaluate your deal flow and new investment opportunities.
Basically, a "syndicate" is simply a group of investors who come together to support a company in a single round. If two separate business angels, plus venture capital firm A and venture capital firm B, make up the seed round of a company, these four entities constitute the syndicate for that round. If venture capital firm B invests the most money, it usually sets the terms of the round and is designated as the lead.
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