Making Your Angel Investing Portfolio More Global
To make angel investment portfolios more global, we need access to markets in ways that work. Recently I was in Santiago, Chile for two events. The first event was “We Investment.” I attended the event courtesy of the US Embassy in Chile. The event and my participation was organized by JulianaGaraizar, Managing Director of the Houston Angel Network, one of the largest and most prolific angel groups in the US. Juliana is an expert in crossing boundaries, having fostered the launch and growth of angel groups in numerous countries.
Accompanying me on this trip was Bethann Kassman, who is also an expert in cross-border angel investing as CEO of Go Beyond Network which operates angel networks and funds in Europe, the Middle East and soon Africa.
I’ve been fortunate to work closely with the two of them for three years as part of Portfolia, an investing platform that offers a series of funds for angel investing. Both Juliana and Bethann served on Portfolia’s Rising Tide investment committee with me.
Although much of our discussion centered on the necessary elements needed to create a thriving ecosystem in Chile, I was thinking about how to offer more international investment opportunities to angels in different markets. It comes down to two essential elements.
Essential Element Number One: Local partners for deal flow and networks
It is essential to have a partnership with people or organizations in the market where you are investing. That partnership needs to bring deal flow as well as an understanding of local legal and financial regulatory requirements. That local partner also serves as the connection into the market to monitor the investment. In some markets, those partnerships are easy to establish because there is already a thriving angel investment community. It is more challenging to find these partners in nascent markets. In emerging markets, often the missing element is finding a partner to curate the deal flow. So, angels may need to take a more active role in the screening process. This cross-fertilization will be helpful for both sides.
Essential Element Number Two: Partnering for legal and regulatory
Funds significantly reduce the friction of angel investing, especially in international markets. As an investor, I make one investment – into a fund – and the fund manages the legal and regulatory requirements for each investment into each company. Currency risk is not eliminated, but it is managed more when there is a fund. A fund also allows me to make a relatively small investment in a variety of companies, but the fund itself would hold a larger position in the company and thereby have more influence.
WeXChange: Testing Dealflow
After the “We Investment” event, I attended “WeXchange” the following week, also in Santiago, Chile. This was a great opportunity to see if there was good deal flow in the region, and whether there were good partners.
I saw pitches from six, early stage, high-growth potential companies. All of them seemed to be investable opportunities. They came through WeXchange’s multistep vetting process conducted by venture capitalists and angel investors. An original group of 98 companies was whittled down to the six who presented, and given the high quality of the final presenters, I suspect that some of the companies from the previous round were worth considering. They all had the characteristics that investors seek: large addressable market, high growth opportunity and strong founding teams.
The WeXchange process showed that it was possible to identify deal flow, and the six companies were from five different countries in the Americas. That reinforced for me the need for a fund to leverage this dealflow to make investments. So, the barrier to making more global investments in this region is formalizing some of these nascent partnerships. That seems like a good next step.