We previously published an introduction to the concept of Angel Investing, introducing this type of investing to many who may not know what it is, or who might be interested in this type of funding. Assuming that the concept of angel funding is of interest to a small investor, how can one then get active in this area?
“CTI Invest – The Swiss Venture Platform” offers a good overview of the landscape here in Switzerland and the type of investors who are active in angel funding:
- Institutional Investors: This is the largest group of investors. They are typically either banks like the Züricher or Aargauer Kantonalbank and are very active in financing start-ups. They might also be investment companies like the Geneva-based Blue Ocean Ventures, who act on behalf of pension funds, large institutional investors or high net worth private investors with a personal interest in Swiss high-tech growth projects. There are also companies like Fongit Seed Invest who closely collaborate and are supported by incubators like Fongit, who are also Geneva-based.
- Industrial Partners: These are large Swiss companies who finance and invest in independent start-ups as part of their corporate strategy on innovation. Some of the major players in this group include companies like Novartis, ABB, Clariant, Ringier Digital, SBB, or Swisscom.
- Family offices: These are private wealth management advisory firms offering total solutions to ultra-high net-worth individuals. For example, they can offer budgeting, insurance, charitable giving and tax services.
- Business Angels: Usually well-experienced individuals with a background as an entrepreneur or business executive, these individuals offer their experience, time and support to promising start-ups.
- Business Angel Clubs: These networks of business angels are typically open to experienced as well as new investors. Amongst the established clubs in Switzerland are A3 Angels, Business Angels Switzerland (BAS), Go Beyond Early Stage Investing, or StartAngels.
Small investors with little experience but an interest in start-ups will certainly find one of the business angel clubs or networks as the best feasible way to get started in the world of investing in start-ups.
These networks all operate slightly differently. However, they typically organize regular meetings, often on a monthly basis, where after having passed a screening phase, two or three startups each give a short presentation, followed by questions and networking. The angel community then discuss the merits of each startup and whether they want to continue with a due diligence assessment, as well as advising on product development, the market, the business plan and/or the investment structure. In a few cases, they move ahead with an investment recommendation.
After this step, it is up to each individual member to decide whether or not he or she wants to participate in the financing, that is, making a personal investment.
Advantages to Angel Clubs
One of the advantages of these angel clubs is that a smaller group of several individual investors can be bundled together, and can invest via a syndication vehicle.
Another advantage for new investors with little background in start-ups is that they can benefit from the experience of seasoned investors. Some of these angel clubs also offer a training curriculum with online sessions on various topics, like evaluation and due diligence or deal structuring, all the way to exiting the investment. This allows any newcomer to move along various stages, from being a novice to eventually becoming a lead investor for the community.
While in some cases, a minimum of CHF 4k of investment is sufficient to get started, other networks expect their members to make at least one investment a year, for some at a minimum of CHF 20k. Investors must be aware of the high risk of these investments, and of the fact that the invested capital will remain blocked until there is a successful exit.
The ongoing growth and success of the angel networks over the past years has proven that angel funding is on its way to becoming an alternative asset class for all investors, not just for high net worth individuals.
Sources:
http://www.cti-invest.ch/Home.aspx
http://www.a3angels.ch
https://www.businessangels.ch/
https://go-beyond.biz/
http://startangels.ch/
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