There are countless stories about successful startup founders who parlay fortunes earned in an IPO or trade sale into becoming early stage angel investors. But what about successful angel investors, what do they do next? Sometimes they form a general partnerhsip,raise a capital pool from limited partners, and join the ranks of the private equity industry. Recent examples are VC firms like Andreessen Horowitz in the US and Point Nine Capital in Europe. But this is not exactly the route that Go Beyond Investing is taking. The six-year old business angel organization with experience in early stage investing and working with newcomers to angel activity is poised to scale up and offer its investment tools (and knowledge platform) to more people via both new partnerships with angel networks and organic growth. Its goal is to increase and professionalize angel activity in a number of regions around the world.
There are a lot of high net worth individuals who will back private companies as business angels, but there is an even higher number of people that could also be interested in participating if there is a way to put smaller amounts of capital to work
The move is part of the trend that sees investment tools and platforms for angel investing going online. Two random examples are Syndicate Room and Startup Angels. There is room for growth. EBAN, the 15 year old European trade association for business angels, estimates that EUR 7.5 billion a year is invested in early stage equity in Europe, alone.
“There are a lot of high net worth individuals who will back private companies as business angels, but there is an even higher number of people that could also be interested in participating if there is a way to put smaller amounts of capital to work,” said Brigitte Baumann, founder of Go Beyond, in a phone interview with DealMarket Digest.
Portfolio Approach to Angel Investing
In an unusual move, GoBeyond, released an investor portfolio performance report in May, “The Go Beyond Investor Report – Introducing Angel Investing as an Asset Class for Investors”, providing a rare look at the performance of individual portfolios and investments made by its 194 member network since 2008. It is not hard to understand why GoBeyond published the numbers. It has been successful and not just on paper.
Its members have already received as a group CHF 12. 9 million in cash back on CHF 10 million in cash invested over the past five years. The estimated net asset value of the remaining investments was CHF 18.5 million at the end of May, based on IPEV standard. In total, its members made 36 investments. Five companies died, and there were 2 exits, with a third underway, according to Baumann. The startups were sold to acquirers from Silicon Valley.
“Their portfolio is exceptional, given present valuation of the remaining companies,” said INSEAD’s Claudia Zeisberger when DealMarket Digest reached out for comment on the figures. Zeisberger said the questions to ask when considering angel investing are what is the return after all remaining firms have been exited. And how long did it take to achieve whatever the cash-on-cash returns were at the end of the portfolio.
Bauman agrees that more will be revealed but asserts that the model is validated with more cash returned than invested after just five years of active investing. “We don’t claim to de-risk early stage investment. A portfolio approach is critical for delivering success to angels, but we have identified a way to equip investors to make decisions based on knowledge for the task at hand and to have a good experience,” she said.
Baumann said she’s devoted almost as much time to understanding the portfolio dynamics of the 192 members as she has on creating the tools to educate angels and supporting entrepreneurs to grow their businesses and find the exit. Some angels have only three companies, while one has 29 companies in her portfolio.
Fintech Wave for Investors
GoBeyond says its dealflow is about 1000 deals a year sourced in 11 countries. The due diligence process funnels that down to 1 investment out of 50 deals screened (N.B. original version of this article, stated “1 out of 500”). The deals that make it through the funnel are benchmarked on valuations and terms. There is a way to leverage community know-how, compensation guidelines and professional deal leadership certification. The company also figured out what to do when someone runs of out of money and wants to sell their shares before an external liquidity event, as well as what to do when minimum tickets in an up-round get expensive for a hot startup.
“Most angel networks focus on dealmaking and neglect supporting the entrepreneurs, not to mention the members of investment syndicate,” said Baumann. GoBeyond is focused on educating investors to improve their ability to make small ticket investments, typically CHF 4K per deal, as well as entrepreneurs. Baumann sees the wider roll out of the company’s platform as part of the fintech wave of new opportunity.