The Angel Investor in the Startup’s Ecosystem
“Angel investor” is one of the best names in the business literature. Maybe, too good a name, to the extent that startups tend to perceive this category of investors as a solution to all problems, which is not. That is why I’ve tried to place it in two ecosystems. You’ll find out what an angel investor may and, especially, may not be.
The Money Ecosystem
The first ecosystem is time-related and refers to the capitalization cycles of a startup. Briefly, an angel investor turns up, as financer, sometime after the founders, but before the capital that demands a completely quantifiable and repeatable Return on Investment. Using bullet points, the ecosystem looks like this:
- Founders: Naturally, they are the ones who start the business, but from the point of view of the resources invested, the contribution in capital is small and this is compensated by work and ideas.
- Angel Investor: It comes after the founders phase and takes a high degree of risk in exchange for a (minority) part of the business, which will be monetized only in case of success and only after a number of years.
- Venture Capital: As different from the Angel Investor, it is an institutional form of financing, even if it includes taking risks for remote benefits. A Venture Capitalist will bring about financing from third parties, as compared to the Angel Investor, which risks their own money.
- Mergers & Acquisitions/IPO: In the exit phase (Mergers & Acquisitions) and/or during the phase of listing on the stock exchange (IPO – Initial Public Offering), the startup is on the brink of maturity, in the sense of a long term predictable profitability. The more available money, the stricter the financing conditions.
Ecosystem of the Organizations and People
If the money ecosystem is time-related, the organizational one refers rather to a definite moment at the beginning of the evolution of a startup. From this point of view, the Angel Investor lives together with the founder among the following organizations and communities:
- Incubators: (Profit or non-profit) organizations that ensure business trainings and work spaces for startups. Most frequently, they are governmental programs and financing.
- Accelerators: These are similar to incubators, but are mainly focused on the growth process of a startup, than on facilities. In the USA, these are rather private than governmental, the same as in the case of incubators.
- Other types of mentors/consultants: Together with the Angel Investors, founders also work together with other experience holders, such as mentors (pro bono or financed by third party organizations) or consultants (which work for a definite fee).
- Communication/networking facilities: To more or less formal trade shows and clubs, you can add Web 2.0, groups ranging from specialized blogs to LinkedIn and other types of presence on social media.
As for financing, a successful entrepreneur will know to look for the appropriate kind of resources which match the growth moment of the business. As for people and organizations, a successful entrepreneur will be able to keep their eyes on the various opportunities available, irrespective of how much they would focus at a certain time on one of them.
Over the last decade, I've built my professional life as an investor, focusing on 3 key areas: financial services, real estate and tech startups. I’ve participated in the setup and development of two major fintechs, and after those two successful exits I’m now directing my resources into building a new enterprise in this area – the Key Way group.
I've started, participated in and developed companies in Romania, as well as Bulgaria, Hungary, Czech Republic, Germany, the UK, Mexico, Dubai and South East Asia. I'm constantly looking for new segments, new markets and new opportunities, and therefore I interact regularly with the regulator institutions and official agencies in various countries and markets.
The most recent example is the GCC area (Gulf Cooperation Council - Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates, and Saudi Arabia). I started to research opportunities in that area at the end of 2018 - more specifically, the United Arab Emirates, which are establishing themselves as one of the most dynamic markets in the world.
The whole experience of working with the official institutions there was a great example of how to attract and encourage investors! ADGM, the Abu Dhabi Global Markets regulator, was established quite recently and I was absolutely impressed with their professionalism.
To start off, I researched the local market regulators online. The information was clear and easily available: I contacted them online, via their website and LinkedIn accounts. They responded promptly, and in only a few days, we set up a series of meetings with the financial markets regulators in both Abu Dhabi and Dubai!
The ADGM gave me full support and very clear, detailed information on what and how I need to do to obtain a trading licence in financial services in the UAE. I met with representatives from both the ADGM registration department (where all new businesses have to register before they acquire a licence for online trading) and from the FSRA (Financial Services Regulatory Authority).
They were very clear on the procedure, steps to follow and criteria we need to meet, which is a fantastic help for an investor on a new, highly regulated financial market.
In a few days I started the onboarding procedure - everything happens online, everything is digital, everything is set up for maximum ease and transparency.
They set investors up for success, but they make sure they vet them thoroughly as well! A "user friendly" approach does not mean lower standards, quite the opposite - they made sure I meet all commercial and business criteria, they assessed my financial, capital and business status and previous experience, and checked references from markets in which I operated previously.
We went through a process of very rigorous assessment and due diligence, and several meetings where I detailed our business plan and long term vision. Professional but friendly - you feel welcome, encouraged and supported as an investor.
Furthermore, their “enthusiasm”, or appetite for new business, equaled mine! They’re happy to welcome new businesses, they work hard to attract them and to set them up for success. I was very impressed that they genuinely appreciate the fact that investors, however big or small, choose their market to set up a company.
I’d love to see this same level of energy, hard work and appetite for business in my home country, Romania.
While other jurisdictions welcome investors and work hard to create the framework for development and success, I often feel that the Romanian regulators, for financial markets and not only, start from a default position of suspicion or, at best, indifference. Investors are regarded with thinly veiled (if at all veiled!) suspicion and distrust and sometimes downright hostility, you almost feel guilty or embarrassed to be successful financially.
I hope to see this mentality change in Romania, because I, as well as most Romanian entrepreneurs I know, really want to make our country a top choice for investments, not just in outsourcing and services. We want to make Romania known for its know how and creativity.
I think Romanian regulators should remember that their whole purpose of existence is to enable business, not hinder it. And as investors, especially once we see best practices from other jurisdictions, we need to remind them of this reality.
- Fintech OS - B2B services and TaaS enabling automation for financial services. The fact that this is a Romanian company that has achieved such rapid growth proves that (to paraphrase) geography is not destiny. Their experience is inspiring.
- Fagura - P2P Lending. Although Fagura is actually coming from Moldova, they are present in Romania. This is a friendly peer-to-peer platform, modelled on UK similar companies. I think it has good potential for success.
- Smart dreamers – a platform for recruitment marketing automation, they’re already in the UK, the US, and Singapore, with enterprise-ready software that helps companies reach and engage with potential candidates online.
- Medjobs – this is a platform for recruitment and jobs in the healthcare sector. I like their focus and the fact that they’ve honed in on this very specific opportunity, as it is a very dynamic niche and was generally very fragmented.
- Typing DNA – such an original idea! They’ve developed an app for typing biometrics authentication – recognizing people from the way they type, this is an AI-based solution for risk-based authentication and fraud prevention.
- Competitors.app – a very useful and comprehensive app for monitoring competitors’ marketing activity across online channels.
- Finqware – this was badly needed in Romania, since most companies and people have several bank accounts and they need a centralized dashboard for their finances.
- Keez – A user-friendly alternative to accounting, payroll, and ERP software.
- Teleport HQ - An AI powered platform and suite of open source tools which simplifies UI building and adds realtime optimisations by analysing user's intentions.
- Cyscale - a Multi-Cloud Platform, for all major providers like Amazon, Google and Microsoft, which handles Cloud Native Security, Threat management and Secure Cloud Design.