1. Introduction to Angel Investing

1. Introduction to Angel Investing

Welcome to the first dedicated guide to Angel Investing by ㊙️ Kodawari, here you will learn the basics but also more advanced elements allowing you to start or perfect your Angel Investor activities. Feel free to give us feedback at sat@kodawari.vc and register to be among the first to receive the dealflow qualified by our teams. Enjoy!

If you have never been a business angel before, it can be intimidating and above all, seem very risky. The image of a business angel in France refers to a few high-profile entrepreneurs (Xavier Niel, Marc Simoncini etc..) who at first glance seem to surf from success to success by investing in French start-ups without any effort. First of all, we thought it was important to clear up a few preconceived ideas about Angel Investing:

  • No, you don't have to be a multi-millionaire**: it is quite possible to start up by investing one or several thousand euros. It is true that this is not nothing, but it is still affordable when you create a diversified investment portfolio
  • No, being a Business Angel is not reserved for investment professionals or experienced business people. Anyone can be a Business Angel if they are equipped to identify the right opportunities at the right time.

We created Kodawari with the aim of offering professional business angel methods to any investor wishing to get started and, above all, to provide access to exclusive investment opportunities pre-qualified by our team. This first multi-chapter guide is dedicated to people wishing to invest in young tech companies in Europe. An audience already familiar with the principles of investing may find these elements a little basic but we believe they are essential and you can find more in-depth content in our toolkit.

Summary

Here's what you can expect in the coming chapters

  • Introduction
  • Debt vs. Equity, Key terms in notes, SAFEs, and term sheets
  • Company stages
  • Deal flow
  • Good founder qualities (and red flags)
  • The market
  • Due diligence
  • Defining your filter, Your day-to-day as an angel
  • Exits, waterfalls, and getting paid back Carried interest, or "carry" Example scenariosSyndicatesGlossaryBooks for further reading

Introduction

In Angel Investing, only two things really matter, the founders and the market. Is the team exceptional? Does it have the expertise, genuine passion and complementarity to create and grow what it builds? Is the market opportunity significant? Is this the right time to build this business?

As a business angel, probably the most important thing you will do is choose the investment opportunities you want to invest in. If these startups grow significantly, you will win. The rest, like the terms of the investment or whatever, are not that important. Usually they become important if the startup fails to grow and investors may not see their money again.

What we are trying to say here is that it is easy for a business angel to be intimidated by paperwork and worry about bad investment terms and indeed you need to have some understanding of these elements. That said, if you invested in Amazon several years ago, it doesn't matter if it was a BSA Air or an equity round... you won either way.

Another fundamental thing to know is that most investments you make will fail. It is possible that 70-80% of your investments will result in a loss of capital. If you make 20 investments, the chances that one or two of your investments will return all (or more) of your investment are high. This is why it is important to evaluate a large number of opportunities, to select only the cream of the crop and to accept that, again, a large proportion of these investments will not result in success. For successful investments, the exit (the exit from the investment) will only take place after several years (usually around 5).

Angel Investing is a volume story because of the probabilities we have just described. If you are not able to invest in a minimum of 10 to 20 companies over several years, Angel Investing is probably not for you.

Do you have any questions? Please contact us at sat@kodawari.vc and feel free to join the community

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