Summer Slowdown For Early Stage Investing? No Way.
Professionalization is changing the operations of angel groups and the demographics of angel investors.
Entrepreneurs and investors have been told that the summer is the slow time for angel investors. You'd better make sure you've pitched to investors before they leave for vacation in June, or you’ll have to wait until September when everything heats up again.
That hasn't been true for about two summers now. Angel investing is now a year-round activity. Angel investing as an asset class is becoming more professional and it has implications for entrepreneurs as well as investors.
The professionalization of this asset class is important because it will de-risk the whole asset class. That will encourage more investors to enter and to fund more innovation.
Across my angel groups and MicroVC funds, I have seen no drop off in the number of investments under consideration this summer or those actively “circling”. Our weekly investor briefings have a full agenda each week. Entrepreneurs certainly aren't taking the summer off, so there are great investment opportunities.
What has changed?
The professionalization of the early stage investment means that you have angel groups with paid staff and well-organized volunteers. MicroVC funds, which are now quite prolific, have the same capabilities and the added responsibility of LPs. With just a small professional staff, MicroVCs and angel groups keep the momentum going during the summer. Of course, many angel groups have their own MicroVC funds, too, which has accelerated this transformation.
Professionalization is changing the demographics of angel investors. More women and people under 50 are becoming investors. These people are more likely to still be employed full time, so they often have inserted their angel investment commitments into the rhythm of their daily life.
The proliferation of on-line and on-demand tools mean that investors can easily access information when they need it. Investors who have a busy day job can log on to a system at night and read the due diligence report on their own time. Managing these systems can be done by volunteers, but when there is a small staff, it is much more effective.
Tip for entrepreneurs: the more thorough your due diligence report from your lead investor, the easier it is for investors to make a yes/no decision. That's particularly true for landing MicroVCs.
From an operational perspective for investors this means:
Short, virtual meetings on dealflow.
Fewer lunchtime in-person meetings and more evening events.
Fewer emails because busy people don't have time for a flooded inbox. Also, email doesn't favor people who are busy and want to respond later. It has a "first come, first heard" feature that doesn't work for asynchronous teams.
Tools such as polling to get feedback from everyone.
Organized calendar with dates mapped out months in advance when possible.
Productivity tools like Slack (although I've had mixed results with Slack, one group uses it well, others not).
What does this mean for entrepreneurs?
Entrepreneurs should fundraise based on what works with the company's milestones and objectives and not the calendar.
Have a lead investor who will create a solid due diligence report that lays out all the risks - good and bad. That document is standing between you and getting investment from fast-paced angel groups and MicroVCs.
When you pitch online, even if it is only to three people, prepare as though you are on a stage or in a conference room. Put a note on your office door so no one comes in. Have a good microphone and camera. That pitch is often recorded and when the investors watch it that evening, you need to have put your best self forward. (btw hotel wifi usually stinks for webinars). This is how you present to dozens or hundreds of people with real checkbooks, so act that way.
Know how much time you have for the pitch. For my groups, we have reviewed the pitch deck in advance, so get to the heart of why your company is a great investment opportunity. Get to our questions fast, answer them fast to get to the next question.
Early stage investing is changing for everyone. Take advantage of that.
Interested in the new era of investing? Consider an angel group like Astia or one of the MicroVC funds through Portfolia.