As part of Startup Norway, Angel Challenge helps investors learn startup investing by doing it. Because the term ‘angel investor’ is used in different ways, people ask us what investing in startups involves, and what is required. This article is designed to provide some answers.
Everyone has heard about investing in public companies. Less often, you hear about people investing in startup companies. These are ‘angel investors.
Who are angel investors?
Angel investors place their own capital and competence in early-stage companies in return for share or equity. This usually means an initial commitment between NOK 50,000 - 250,000. To diversify risk, more investments into a portfolio of companies often follow. There is a greater risk investing in a startups compared to public or exchange listed companies, but also a higher potential reward.
In Norway, we have a growing, dynamic angel investor community. Angel investors work actively to help grow the companies they invest in, often holding a position on the board.
Investing in startups requires a long term view. There is no guarantee of financial payback. The excitement, successes and even failures of bringing a product or service to market are part of the investor journey.
Sometimes investors have started one or more of their own companies and they understand the highs and lows. They work alongside companies they invest in, bringing expertise and experience to the team. The entrepreneurial spirit is part of their DNA.
Other times, investors come from family offices or advisory firms. One thing investors have in common, is competence and a network that can be used to help startups succeed and secure a better return on investment. This is the idea of ‘smart money.’
How to find good investment opportunities
There isn’t any one way to start. Sometimes the opportunity may come to you – a friend or connection that needs additional funding. Other times, you actively seek out high potential startups. Either way, gaining access to deal flow is essential for good investments.
One place to start looking for startup investment opportunities is through business incubators and accelerators. These organisations arrange events, such as demo days, to showcase up and coming startups.
Connect with other investors
You may already know startup investors or you may want to reach out. Business angels probably don’t list ‘Angel Investor’ on their LinkedIn profile, but they often have private investment companies.
Investors with similar interests, explore opportunities and new deals together. They may decide pool capital and resources, and invest together in a syndicate.
Go to startup events
There are hundreds of startup events each year. Some explore innovation in a particular high-tech industry while others are more general. Check whether the event is planned for entrepreneurs, investors or both.
Across Norway, startup, funding and investor organisations and communities work together to support each, and in turn their members and the public. Startup Norway’s Facebook page is one of many event listings and information sites.
Participate in workshops
Just like any skill, investors are continually exploring new methods and sharing knowledge about evaluating, growing, and at some stage, selling their businesses. Through hands-on workshops, investors meet, review deals and learn - at the same time. There is always a next step in managing deals and growing companies.
There is no guaranteed return on an investment, but taking courses and ‘learning by doing’ can improve your chance of success. At minimum you will come away knowing - ‘Is this for me?’
Introduction to Startup Investing Infosession
at Oslo House of Innovation