Brilliant idea. No Investors. Pay for a mail out through an Angel Network. Email Venture Capital funds. Lots of interest. But it all goes away. Why? What did you do wrong? Let’s look at it from an Investors’ point of view... why do they drop those “perfect” investments?
Take a look in the Resources > Business Angel Networks page of the Meteorical website and you’ll see a list of Angel Networks. There are a lot of them in the UK and this list is not exhaustive. The list includes state sponsored and commercial networks. What are the differences between them? Is there a third, better, type of network for Business Angels? This article compares three types of networks… seems like we’ve already answered the last question!
In the UK Business Angel Networks can be split broadly into three groups. Clearly there is going to be overlap and some slight variation between the categories but the division is useful. First, what are the three types of Angel Networks:
- State Sponsored. Networks such as Xenos, YABA, etc. receive funding from a government (UK or EU) to sift through applications and present them to their members. They are usually regional since their money comes (indirectly) through the RDA. Their primary aim is to achieve their customer’s goal – in other words, the goals set by the government. The government usually sets Key Performance Indicators (KPIs) such as number of deals, amount of money into the local economy and number of jobs.
- Commercial. Networks such as AngelsDen, Envestors, Beer & Partners, etc. depend on deal flow for all their income. The income is received from their customers – the companies that they obtain funding for so this is their key aim in life. Most will present deals from anywhere in the UK and since they are more selective the number of deals tends to match the state sponsored networks.
- Private. Private networks are generally below the radar and run by the angels themselves. Their key criterion is how they are going to exit deals with money. Any costs will be to cover shared resources (so next to zero). The number of deals reviewed will be very small since propositions will only reach the group if one member is already seriously considering making an investment.
A comparison between types of networks is most easily seen in the following table:
|Angel membership cost||£100 – £200pa||£100 – £200pa||Generally zero|
|Typical number Angels||100’s||1000’s||1-10|
|Propositions presented||50 per year||50 per year||5-10 per year|
|Directly employed professionals||Many||Some||None|
|Selection Criteria||The best they’ve got||Most likely to be funded||Return on Investment|
|Goal||Most deals & jobs||High value deals||Exits|
As a competent Business Angel you may ask yourself what your goals are for your investment. Given this, you know where to concentrate your time.