Angel Investing Basics By Angel Investing School Contents Introduction 3 Welcome to the Angel Investing School Chapter One 5 Angel Investing VS Stocks & Shares Chapter Two 7 Overlooked & Undervalued ways to grow wealth Chapter Three 8 The AIS Mindset and why you need it to succeed in this game Chapter Four 9 Active VS Passive Angels Chapter Five 10 How to get started today Conclusion 11 What next? Glossary 12 Terms that every aspiring angel investor should know INTRODUCTION Welcome to the Angel Investing School (AIS) Our Big Dream Over the last few years, we've taken over Investing in early-stage businesses has 400 individuals living across 50 countries historically created immense wealth for a and from all walks of life on a select few who had access to the right transformative journey. We've helped them information and tools, leaving behind a create meaningful connections and gain significant equity wealth gap. Our dream is the knowledge they need to thrive in the to bridge this gap by empowering YOU startup ecosystem. Collectively, our with tools and knowledge to build wealth community has invested over £3M in for yourself and future generations to startups. come. So whether you have a full-time job, a At Angel Investing School (AIS), we imagine successful business, or a freelancing a future where individuals like you can own career, we believe that angel investing is your private Family Office, making something that everyone should have the strategic investments across diverse asset opportunity to experience. classes to safeguard and grow your family's generational wealth. How it Started Our journey began as a candid discussion about wealth and equity dynamics, and it has evolved into a powerful movement aimed at helping experts, professionals, and entrepreneurs create wealth through investing in startups with as little as £1,000. WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 3 INTRODUCTION Angel Investing Through the Ages The Evolution of Angel Investing Angel investing is not a new phenomenon; The 20th century saw the emergence of its origins can be traced back in time to angel investor groups, bolstering startups great historical adventures, such as and innovations. With the advent of Christopher Columbus' Westward Voyage, technology and globalisation, angel which Ferdinand and Isabella of Spain investing transcended borders, allowing financed. This early form of investing investors to support ventures worldwide. involved both financial and emotional Today, angel investors play a crucial role in support for high-risk endeavours. The term nurturing startups, driving innovation, and 'Angel' was popularised within Broadway shaping the business landscape. theatre, where well-to-do patrons of theatre would reach into their own pockets to back shows or talent they liked, giving productions a shot at success instead of facing failure even before opening night. In 1978, William Wetzel, a then-professor at the University of New Hampshire and founder of its Center for Venture Research, completed a pioneering study on how entrepreneurs raised seed capital in the US. He used the term “Angel Investor" to describe the investors who supported them. Over time, this concept evolved into backing entrepreneurial ventures, ultimately leading to the establishment of angel investing networks. WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 4 CHAPTER ONE Angel Investing VS Stocks & Shares How do they both compare? 2) Risk & Reward Angel investing and traditional stock Angel investing is considered high-risk, market investing are two distinct high-reward. Startups have a higher approaches to building wealth through likelihood of failure, but successful ones investment. Both avenues offer can yield substantial returns – ranging opportunities, risks, and potential rewards, from a 10x to 1,000x or more return on but they operate within different your investment. For example, Mike frameworks and involve varying levels of Walsh’s $5K investment in Uber returned engagement. Let's explore how these two him nearly $25 million between 2010 and investment methods compare and 2019 (5000x ROI). The best part is that contrast. angel investors often take an active role in mentoring and advising the companies they invest in, to mitigate risks and 1) Investment Focus increase the chances of success. Angel investing is primarily focused on investing in privately-owned, early-stage Investing in stocks and shares carries its startups (small businesses) with high own set of risks, but it generally offers growth potential. It involves providing more liquidity and diversification, with capital to entrepreneurs in exchange for much lower returns ranging from a 2x to ownership equity or convertible debt. This 10x return on your investment. For type of investment allows angel investors example, if you invested $5K into the S&P to have a direct impact on the growth and 500 in 2010, it would have turned into success of the companies they invest in. roughly $18K by 2019 (3-4x ROI). On the other hand, investing in stocks and shares involves buying shares of publicly- traded companies listed on stock exchanges. This type of investment gives individuals partial ownership in large, established corporations, although you have no control or impact on the growth of the business. The value of stocks can be influenced by market trends, company performance, economic conditions, and other external factors. WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 5 CHAPTER ONE 3) Involvement & Expertise 5) Capital Requirement Angel investors are often hands-on and Angel investing often requires a higher involved in the startups they fund. They starting amount, from around £1,000, to leverage their industry expertise, networks, make individual investments in startups. and guidance to support the growth of the companies. This direct involvement can be Whereas investing in stocks and shares is fulfilling for investors who enjoy actively more accessible, with a starting amount of contributing to entrepreneurial success. as little as £5. Fractional investing and robo-advisors have also made it easier for On the other hand, investing in stocks and retail investors to enter the stock market. shares is often more passive. Investors can choose to research and monitor their investments, but they don't typically have the same level of influence over the companies' operations or strategies. 4) Returns & Time Horizon Angel investors typically expect higher returns compared to traditional stock market investors. However, these returns may take shorter (years) or longer (decades) to materialise, and there's also a likelihood of not seeing a return at all if a startup fails. The time horizon for angel investments can vary; an exit occurs typically through acquisitions or initial public offerings (IPOs). Stock market investing offers the potential for small consistent returns over a long period of time, and the time horizon can vary depending on the investment strategy. Some investors seek short-term gains through trading, while others take a long-term approach, benefitting from compounding returns over decades. The average stock market return over 15+ years is between 8% - 12%. WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 6 CHAPTER TWO Overlooked & Undervalued ways to grow your wealth In the finance space, we talk about the Early Investment in a Startup (Angel importance of growing your wealth Investing) through mediums such as real estate, Angel investing is a powerful means of stocks & shares, starting a business, and growing your wealth while supporting the list goes on. But at AIS, we believe innovative entrepreneurs. A viral example there are TWO other ways that are often would be how Mike Walsh turned $5k into overlooked and undervalued. $24M+ when he invested in Uber. Outlier, maybe, BUT gaining early access to great Early Employee of a Startup opportunities is the name of the game. Joining a hyper-growth startup in its early stages, although sometimes risky, can be a very strategic move to accumulate wealth. Many startups give their early employees equity as part of their compensation package, allowing them to benefit from the company's growth and success in the future. Being part of a promising startup can provide a unique opportunity to learn fast, create, and build your wealth quickly – if you choose the right company. Note: This is your sign to negotiate equity as part of your compensation package if you haven’t done so already! WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 7 CHAPTER THREE The AIS Mindset explained: Why you need it to survive in this game The AIS Mindset TThe "AIS Mindset" revolves around two central principles: value creation and purposeful investing. At AIS, we believe START-UPS that to attain generational wealth in this THAT CREATE day and age, you either need to become a VALUE value creator and/or invest in those who create value. We believe that angel investing isn't just about monetary returns; it's about contributing to value creation within startups. By aligning your investments with value creation, you actively drive positive change in the entrepreneurial landscape. Purposeful investing means aligning your investments with your values and beliefs. It's about backing businesses that INVESTORS IN resonate with your passions and START-UPS contribute positively to society. Embracing THAT CREATE purposeful investing elevates your role as VALUE an angel investor from a passive stakeholder to an active catalyst for growth. ANDY AYIM JULIE FEDELE VERA BAKER CATHY WHITE WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 8 CHAPTER FOUR Active VS Passive Angels: What do you want to be? As you venture into angel investing, it's Active angel investors essential to define your role and These types of angels usually go beyond approach. This section outlines the providing capital. They actively engage distinction between passive and active with the startup, leveraging their industry angel investing, and helps you determine knowledge, connections, and insights to which aligns with your goals and help the startup solve any problems and resources. accelerate their growth. They may also take on advisory roles, provide mentorship, Passive angel investors and actively participate in decision- These types of angels provide capital to making processes. This means that you startups but typically take a more hands- also have the opportunity to influence the off approach, allowing the founders to direction of the business. drive the business. They provide funding and guidance when requested, without This approach demands more time and actively involving themselves in day-to- engagement but can lead to higher impact, day operations. Passive investors often deeper connections with entrepreneurs, prefer to focus on diversifying their and sometimes higher returns. investment portfolio and relying on the expertise of the startup's management team. This approach suits investors seeking diversification and limited engagement and can sometimes be a great thing as they stay out of the way of founders and let them get on with it. While it requires less hands-on commitment, passive investors still benefit from potential returns. WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 9 CHAPTER FIVE How to get started today: Your quick start guide Step What How Subscribe to the AIS Angel Insider to stay up to Join the AIS date with what's happening in the startup & angel Angel Insider 1) Get plugged in investor space. Receive weekly insights and bite- weekly sized pieces of information on angel investing. newsletter Clarify your investment goals, focus areas, risk, 2) Educate and check size. Determine the types of startups Enrol in the 5 yourself & Define you want to support and the sectors you find week AIS Live your strategy most interesting. Having a defined investment Course thesis and strategy will guide your decision making and increase your chances of success. Connect with other angel investors, entrepreneurs, and industry experts. Keep up to date with trends, attend events, join Join the 3) Network & communities, and engage in conversations. A monthly find deals strong network can provide valuable insights, deal membership flow opportunities, and potential co-investment collaborations. Before you make your first Angel investment in Self 4) Self the UK, the FCA requires you to self certify either Certification Certification as a High Net Worth or Sophisticated Investor. Statement You need to decide whether you want to invest as an individual or set up a company that you 5) Choose your invest through; both have their pros & cons. For Learn more investment example, investing as an individual means you about EIS/SEIS vehicle could get up to 50% back in tax via the EIS/SEIS tax relief scheme. WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 10 CONCLUSION What next? Congratulations! You've taken your first Our live course runs twice a year. It is a 5- steps into the exciting world of angel week intensive program designed to take investing. We hope this e-book has you from knowing nothing about angel provided you with valuable insights, setting investing to feeling confident and the foundation for your journey. Now, knowledgeable enough to support and you're ready to take your knowledge and invest in the companies you truly believe passion to the next level. in, with expert-led content, real-world case studies, and a supportive community. Want to dive even deeper into the intricacies of angel investing? Be ready to invest in just 5 weeks Week 1 Week 2 Week 3 Week 4 Week 5 Welcome & Developing Sourcing & The Legal Building a Course your Thesis Screening Anatomy of a Value First Overview Pitch Decks Deal Personal Brand - ANDY AYIM MBE Founder & Director Angel Investing School WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 11 GLOSSARY Terms that every aspiring angel investor should know Term Definition An individual who provides financial backing for small startups Angel Investor or entrepreneurs in exchange for ownership. An analysis of a company’s percentages of ownership by founders, investors, and other owners. If a new company was Cap Table started today with 4 co-founders and the equity split equally between them. The cap-table will equate to 25% ownership for each founder. A comprehensive review of a business undertaken by a prospective buyer or investor. When assessing startup pitch Due Diligence decks, investors review the problem, founding team and key metrics among other things. The number of investment opportunities available at a given time to a particular company or investor. Top VCs in the UK Deal Flow such as Local Globe, Atomico and Index Ventures invest in less than 5% of the dealflow they receive. Ownership interest in a company typically represented by Equity shares or stock. This is the stage at which the business is finalising its product or services and gathering market data. This is also called the Early-stage Business seed stage of a startup. In many cases, it also includes getting enough funding to support product development. A founders strategic plan to sell their ownership in a company Exit Strategy to investors or another company. WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 12 GLOSSARY Term Definition A privately held company that handles investment management and wealth management for a wealthy family, Family Office generally one with at least $50–100 million in investable assets, with the goal being to effectively grow and transfer wealth across generations. The number of times a startup goes back to investors to raise more capital. The goal of every round is for founders to trade Funding Round equity in their business for capital they can utilise to advance their company to the next level. A company whose ownership is organised via shares of stock Publicly-traded which are intended to be freely traded on a stock exchange or Company in over-the-counter markets. Often treated as the first round of funding from family and friends and/ or angel investors. Investing at pre-seed is usually Pre-seed Round high risk as the startup hasn’t found product/market fit and there is a high risk of failure in the first 2 years of starting a business. The months remaining that the company can afford to Runway operate given the burn rate, revenue per month and money in the bank to cover operational costs. Non-binding agreement outlining the conditions of an Term Sheet investment. Usually the lead investor in a funding round presents the term sheets all the other investors agree to. An estimate of how much a business, property, art or any asset is worth. For valuing startups, things differ as many times Valuation they are pre-revenue. There are several methods investors use i.e. comparing against existing companies who are similar. Visit the AIS Dictionary to learn more terms WWW.ANGELINVESTINGSCHOOL.COM @ANGELINVESTINGSCHOOL 13
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