The venture investment space is changing dramatically. Unprecedented technological advances, democratisation of investment opportunities, and a new generation entering the arena (in the US alone an expected $30 trillion is to be passed down to millennials in the coming decades!). All mean that traditional investing structures are moving to the background, and that innovation is needed in the ways investors deploy capital. (No, sending documents via Docusign does not count as innovation.)
What does this mean specifically for angel groups, who want to attract this new generation and thrive in the changing demographic? With such a large group of, mostly inexperienced, investors coming to market, and so many investment platforms popping up, how do you distinguish yourself?
Educate investors to unlock their potential and bind them to your platform
You want to attract a younger generation of angel investors. Investors who are probably unfamiliar with the mechanics of investing via angel groups, let alone investing directly in start-ups. Bind them to your brand by offering a platform for learning - a great competitive advantage.
Start-up investing isn’t easy. Knowledge and experience is required to competently judge whether or not a start-up is going to be the next big thing, and worthy of your hard-earned cash. An angel group has a lot of exactly that knowledge and experience under one roof, and as such is a great platform for teaching the beginners.
In addition, with start-up investing itself being hard enough, angel groups should endeavour to make angels’ lives as easy as possible. Easy access to tools for performance tracking, collated updates from the start-up, or worse, the nitty-gritty administration (‘angel investing as a service’?). SPVs for example are a great way to facilitate angel investing, whilst at the same time taking a lot of the boring stuff out of investors hands. Doing so allows them to focus on one main thing: becoming better angel investors.
Research shows younger generations want to invest with purpose and influence change
Making money is nice. But making money AND supporting causes you believe in is infinitely nicer! In 2017, a Morgan Stanley survey found that 86% of millennials are interested in sustainable investing that aligns with their values. Investing in companies or funds with positive social and/or environmental impact is favoured over mere profit. The same survey found that millennials are twice as likely as the overall investor population to invest in companies targeting social or environmental goals.
As an angel group you cannot ignore this trend. Providing a pathway for making money is not sufficient if the investor will not feel connected to the purpose. You need to understand your investors and potential new angels. For instance, one angel investor may have a particularly strong interest in biotech start-ups as he’s working in the medical field. Another investor has developed a keen interest in edtech, as he’s now raising two kids and seeing the potential for innovation in the field first-hand.
This point ties in with the next point on fostering connections between angels. An investor in his 20s looking to invest some of his earnings in venture deals may not be particularly interested in edtech. Exposing this person however to experts and fellow angels who do feel strongly about this cause emphasises the purpose, which in turn can create interest.
Supercharge your investor base by fostering connections
Angel groups can be a massively exciting place to share knowledge. Insurtech, biotech, edtech, etc. Great technological advancements are happening at a blistering pace, yet all but a few people have true in-depth knowledge of these new fields. At least the sort necessary to make well-founded investment decisions. Unknown means unloved and so it is hard to get excited about an investment opportunity in an area you don’t fully understand.
To tackle this and to garner interest among your angels it is key to provide a platform where the expert knowledge of the few is shared freely with the many. This can take many forms, for example a digital library with the best articles, content creators and podcasts in a certain field. It can take the form of a monthly Clubhouse discussion, a recurring podcast Q&A with a renowned expert or founder in the sector, or a weekly Twitch live session contemplating anything hot and happening in angel investing. Either way, millennials are the perfect target audience, as a generation that experienced the rise of the digital age first hand, they will be much more open than older generations to whichever creative outlet or platform you can come up with.
In addition, and not to forget, you may have angels within your ranks that are experts in a certain field. Through business ventures, employment, or previous investments, certain investors may have gained very detailed expertise in a specific area. For example, who’s better suited than judging the merits of a legaltech scale-up than a few innovative lawyers investing their own money? There’s simply a lot to learn from your fellow angels, so there’s a lot of value in fostering an environment within which this is easily achieved.
Providing such platform with unparalleled access to the best experts and inside knowledge will be a defining factor in being able to attract the next generation.