We’re delighted to present the “Inspirational Angel” talk given by Steph Allen at our “Introduction to Angel Investing” event held at Thomson Reuters last week. Take it away, Steph…

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The popular perception of the angel investor is still of a grey-haired, male, retired executive, with a lot of time on his hands. Now I’m none of those things – and I’ve been investing as an angel for the last 3 years. I won’t pretend that the stereotype is obsolete, but it isn’t nearly as prevalent or representative as it used to be. And there are a lot more people like me.

So… why do I do it?

It’s active investing

Well, for starters, I find it a much more interesting style of investing. I’m an active investor; I don’t just mean I invest regularly, but that I tend to be actively involved in my investments. I contribute not just money but also where I feel I can add value – in areas such as strategy, fundraising, insights and contacts.

Compare this to being an investor in listed equity, where you will likely only ever be a number, and your influence or opinion just a fraction of a fraction.

As an angel investor, you can choose to be part of the journey. I voice my interests with influence and have the opportunity to make a meaningful contribution and play a significant part in the potential success of the business.

I learn

I also learn a lot from investing as an angel. I learn from the entrepreneurs, who know a lot about their vertical  (and are often among the most charismatic and inspiring people I get to meet, with a self-confidence and total belief in their product – something I see an awful lot less of in more corporate business environments.) You also learn a lot from the broader angel community. Angels often invest collaboratively, making them incredibly valuable, in terms of growing your professional network and aiding your investment decisions

As an angel investor you’re surrounded by lots of smart and interesting people. And I learn a lot as an angel from the questions they ask, and the investing decisions they make. Recognise too that acting with a number of others as part of a group of Angels can greatly improve your leverage in the negotiation of investment terms.

It’s better for start-ups

However, as well as angel groups being better for the investor, I also believe that Angel Investment can represent a better strategic decision for a fundraising company to make, versus the alternatives. I will focus less on VC – as that tends to come in later-stage – and more on crowdfunding platforms which have proliferated in the current environment.

Fundraising is actually a lot easier than it used to be. And in a lot of ways it has become too easy for companies that do not represent good ideas to get money via these retail-targetting platforms featuring good pitches for bad products – that fail quickly. I have a real concern that it may harm the broader industry as people get put off by these bad examples.

But I believe that crowdfunding platforms are not only a poorer decision for the investor, I also do not believe they offer the value-add that angel networks do for the companies, either. Start-ups don’t just need money – they need smart money. Angel networks make much more smarts available to a company than raising via a crowdfunding platform

Bluntly – if you know the right people, your chances of success are drastically increased. Money alone – particularly for a start-up in the tech space – is very rarely enough (in itself) to secure the kind of user base critical mass that’s vital for success. You need the right people on board: strategic partners with an invested interest in taking your product to market and promoting it through their network.

Furthermore, having the right people on board sends a strong signal to other potential investors. As I mentioned previously, Angels often invest together, either explicitly via syndicates, or through the attraction value represented by investors already involved. That is, the involvement of certain angels can massively increase a company’s chance of success. I’ll admit myself that if an angel I admire is investing in an opportunity, I see that as a further sign of strength for the company. This is In part because I may admire the investing prowess and success of the angel’s previous investments, but also because I know that that angel is well-positioned in that particular industry or niche, to promote the product among their network.


Finally for the ‘why do it’ question, I have to mention the relative tax benefits that investment in this space brings. Since the opening up of the EIS programme, and the introduction of SEIS, the vast majority of my investments sit within one of these 2 tax wrappers, which, under the current government, offer 30% and 50% income tax relief, respectively, as well as upside tax protection, too. For me, the generosity of these tax relief programmes offers handsome-enough downside protection for the increased risk I am undertaking in investing in smaller firms.

What do I look For?

So what do I look for when I look to invest? What criteria do I consider key, when evaluating a company? And where do I look for opportunity?

A familiar market

Firstly, the product has to be one I understand. And it has to be in a market in which I have either experience or contacts – and ideally both. I’m not going to know about the relative strengths of the product and proposition – the competition or the opportunity it represents, if I don’t have experience or relvant contacts. I will not invest opportunistically in a company that had a great pitch or proposition if it’s for a product I don’t understand. Start-ups exist in a marketspace where due diligence and company information is a lot harder to secure. If its an industry you don’t know already – the lessons via start-up investments come very, very expensive!


If a start-up clears my market, product and opportunity hurdles, the next thing that I will insist on is meeting the founders, to quiz them directly about their opportunity. And to look at the whites of their eyes when they answer me. Do they have not just the right answers – but also the drive and the energy to run the team? When times get lean, do I think they have the leadership to deliver on their ambition? Importantly, I will always come to this meeting with a criticism. If this is to be a company that I invest in, I want to be confident that I can work with them – and a key indicator here is how they take a conflicting opinion. Can they handle it, would they incorporate it? Is this a founder who could pivot if the market demanded it?

Which leads on to my next point…

After all this positivity, it would be remiss to not mention the greater risks of investing in start-ups. I’ve lost money when companies have failed on me, and unlike listed equity – where the value of your investment can go down – if things don’t go well for your start-up, it will probably go to nothing. Statistics vary in their quotation of high failure rates, but while they’re high, it’s worth bearing in mind that they reflect every start-up started. Not all of these sought angel investment. And a lot of them probably wouldn’t have secured it if they had.


You can better manage the downside risk by the way you source your opportunities. It helps to work with networks (Angel Academe is one of mine), where a lot of due diligence has already been done on the opportunity before it is presented to its members. This first filter, getting rid of a lot of the fodder that feeds the high quotes of failures, measurably increases your chances of success. And it introduces you to an extraordinary network of professionals – on both the entrepreneur and investor side of the fence. And it is for that reason – as well as the journey and the potential returns, that I continue investing as an angel.