Angels Admit To Following ‘Gut Instinct’ When Making Investments
Research has shown that Angels Investors (high net worth individuals who invest money and knowledge into companies who require funding) mainly follow their intuition ahead of financial calculations when deciding whether to invest in a company.
In a survey Angels Den conducted with 50 experienced Angels, a staggering 73% said they used their ‘gut feel’ to a great extent or as the main way to value an early stage business and every single Angel said they used it to some extent . “When a company is just starting out it generally has no assets or track record on which to base an accurate valuation.” said Lois Cook, co-founder of Angels Den (www.angelsden.co.uk), one of Europe’s largest Angel networks. “Instead most Angels rely on their own intuitive judgement of how much money the company could make and what share would make that a good investment.”
Human and market factors also play a big part, the main one being the management team, and whether they could work with them, which was used to a great extent by around half the Angels.
Surprisingly, most said that they don’t rely to a great extent on an accountant’s or professional advisor’s valuation. Almost a fifth of respondents said they didn’t rely “at all” on their advisor’s calculations. Only 5% said that they relied completely on an advisor’s calculations.
“Angel investors are drawn to entrepreneurs with passion,” said Bill Morrow, co-founder of Angels Den. “The most recent deals we have done have been based on personality, on the Angel seeing some spark and almost investing in the person rather than the idea,” explains Bill. “Business Angels invest up to £1bn a year in early stage businesses in the UK. They are the life-blood of the start-up business world. As well as finance, Angel investors invest knowledge into young companies.”
In the three years since it launched, Angels Den has become one of the largest Angel networks in the UK and Europe. Over 3,000 plus Angels are registered directly on the site with links to thousands more via syndicates.
Angels Den holds regular SpeedFunding™ events (a similar concept to Speed Dating) across the UK and internationally in Singapore and soon in Malaysia and Hong Kong.
The research was conducted as part of an initiative to inform women high net worths about Angel investing. Angels Lounge launched in April 2010 to encourage more women to become business Angels. This has achieved great media exposure and is a force to achieve more funding, particularly for female enterprises. The next Angels Lounge masterclass in Angel investing is on 7 September, please click here for more details.
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For further information, photography or interviews, please contact Frances Knox on 01582 464048 or frances@angelsden.co.uk.
Background on Angels Den
- Angels Den (www.angelsden.co.uk) has one of the largest Angel networks in Europe, with over 3,000 Angel investors and links to thousands more via syndicates.
- It provides a direct route to an Angel investor and is the only company to offer individual, one-on-one pitches, which it says are less intimidating and more rewarding for both the person pitching the new business concept and the Angel investor at its regular SpeedFunding™ events (a similar concept to Speed Dating)
- Angels Den pioneered SpeedFunding™, based on Speed Dating, where entrepreneurs pitch to a business Angel individually or in small groups then move on to the next one, seeing up to 12 Angels at one session and achieving great results. It is still the only company in the UK to offer this pitching format so SpeedFunding™ events are generally oversubscribed.
- SpeedFundings’™ success is attributed to the chemistry that starts to evolve during a face-to-face chat between the entrepreneur and Angel, which simply doesn’t happen when an entrepreneur presents to Angels ‘en masse’. On average 90% of entrepreneurs pitching at an investment event gain at least one interested Angel and some have as many as ten from a single event.
- Angels Den also offers significant guidance and assistance to its entrepreneurs including holding regular open days providing free advice from how to write a business plan to pitching to an Angel investor. It prides itself on being the human face of angel investing and actively campaigns to educate people on Angel investing and dispel the myth that Angels have ‘scales’ (not helped by a certain TV programme).
- Angels Den is passionate that every business, with a good idea and a sound business plan, should have the opportunity to access funding. It is a straight-forward, transparent, cost-effective and fast service connecting entrepreneurs with potential investors
- It was set up Bill Morrow and Lois Cook after their experience working with early stage businesses who struggled to get funding despite paying thousands of pounds in fees,
- It is aimed at small and medium sized businesses to make Angel investing accessible to the person-in-the-street
- Angels Den is seeing a surge of interest from entrepreneurs, as banks are increasingly cautious about investing in fledgling businesses
- Over 3,000 individual pitches, on average, take place a year between entrepreneurs and investors
- Angels Den does not vet companies looking for funding and it has no minimum funding requirement
