After successfully selling two companies, I embarked on a journey to explore the world and indulge in various adventures. My travels included three months exploring the North and South Islands of New Zealand, another three months traversing the heart of Australia, visits to iconic landmarks like Mt Kailash (in Tibet: considered sacred in four religions: Hinduism, Buddhism, Jainism and Bon) and Mt Everest, and even kayaking with whales in Antarctica.

Eager to continue my entrepreneurial journey, I delved into angel investing, making personal investments in four companies. As the manager of the South West Angel Investor Network (SAWIN), I contributed to an additional 11 deals, amounting to a total investment of $11 million. Managing SAWIN, I conducted a fascinating experiment, introducing feedback sheets for each presenting company. The results revealed that most companies scored between 65-75% as good opportunities. However, the real insight was found in the standard deviation, with companies more likely to attract investment showing higher variability.

Transitioning into a role as an Entrepreneur in Residence with the Business Incubator SETsquared, affiliated with Bristol University, I supported 77 start-ups to medium-sized enterprises. This role involved delivering training programs and providing numerous coaching sessions, contributing to the growth of these enterprises.

Arriving in Australia in 2012, I continued my pursuit of a promising company to invest in, becoming the Executive Director at TiE Sydney, an international nonprofit supporting entrepreneurs. During my tenure, I increased membership by 60% and organized an international start-up competition.

With the establishment of the “ON Program” by CSIRO under Malcolm Turnbull’s leadership, aiming to bring technology from universities to the real world, I became a lead facilitator. Overseeing 100 teams through the program, I witnessed remarkable results, including 14% of team members being professors and 14% of the teams creating companies but still none that I would personally want to invest time or money in.

As a lecturer at the University of Technology Sydney and Australian Film Television and Radio School, I shared my knowledge on entrepreneurship, startup structures, corporate governance, ethics, finance, and negotiation. Additionally, I delivered courses at various institutions, including the National Acoustics Lab, Australian Catholic University and the University of Sydney, while assisting numerous private clients.

In 2020, recognizing a need for change, I shifted focus back to my engineering roots, diving into the realm of data science. This transition also highlighted the evolving landscape of data science, emphasizing the importance of understanding underlying assumptions and weaknesses in models to mitigate risks.

Conundrums

What is the success rate?

In my quest for insights into the attributes of a successful business angel, I encountered a surprising scarcity of research. However, one notable report conducted in the USA and replicated in the UK introduced the “5:4:1” ratio. This ratio implies that out of every 10 investments, 5 will yield no returns, 4 will recover the initial investment, and 1 will emerge as a star, ideally providing support for the other 9. Crucially, for this statistical model to hold, the business angel must have unwavering confidence that each investment will become a star within five years.

It’s important to acknowledge the limitations of this report, notably the survivorship bias, as it only considered business angels who remained active in the field. In my experience at SWAIN, I observed a 30% annual churn in individuals aspiring to become business angels.

An even well-honed, financial Business Angles don’t understand basic statistics. One business angel, upon learning of the 5:4:1 ratio, casually remarked that he already had a star in his portfolio, allowing him to pursue higher-risk investments. This perspective highlights the dynamic and often unpredictable nature of angel investing.

Lone Angel or Collaborative?

Navigating the world of angel investing presents a genuine conundrum. Consider a scenario where you encounter a brilliant deal — the natural inclination is to invest a substantial amount to potentially offset any failures and maximize returns by going “all in.” Conversely, if uncertainty looms, the instinct might be to invite friends to join the investment, thereby sharing the risk. However, this could potentially raise doubts about whether the investment is worth pursuing at all. So perhaps an Angel should always invest on their own.

Adding another layer of complexity, when someone refers you to a deal, it raises questions about their motivation. Are they referring you because they genuinely believe in the opportunity, or is it a reflection of uncertainty in their own judgment?

Balancing the motivations of all involved parties becomes a substantial challenge in angel investing. Striking the right equilibrium between risk, collaboration, and individual judgment is crucial for making informed and strategic investment decisions. This delicate balance requires a nuanced approach that considers both the potential rewards and risks associated with each investment opportunity.

What makes a good Business Angel?

The word “Hubris” encapsulates a singular characteristic that, in my view, defines what makes a good business angel. Wikipedia defines Hubris thus:

Hubris (from Ancient Greek ὕβρις (húbris) ‘pride, insolence, outrage’), describes a personality quality of extreme or excessive pride or dangerous overconfidence and complacency, often in combination with (or synonymous with) arrogance.

Observing the world of business angels, it becomes apparent that many exhibit a level of dangerous overconfidence in their abilities and knowledge. Some attribute their success to sheer prowess, often fuelled by a stroke of luck, while others may lack a clear understanding of what success truly entails. Success in angel investing is not merely about recouping one’s investment nor achieving a modest return; it requires returns that surpass the opportunity cost and cover the inevitable losses from unsuccessful deals. Big financial wins in this arena are exceptionally rare and noteworthy when they occur.

Reflection

I recognize that I should posses sufficient Hubris to be a Business Angel. I maintain a perpetual sense of curiosity and a commitment to continuous learning about the world. Whether delving into technical intricacies or exploring psychological aspects, I acknowledge that I know a little about a lot. In my interactions with founders, driven by curiosity, I’ve often witnessed business ideas disintegrate upon closer scrutiny. This realization has led me to conclude that while I may not align with the archetype of a business angel, my qualities as a founder and CEO are better suited, driven by an ever-expanding knowledge base and a persistent thirst for understanding the intricacies of the business world.