New regular feature: "Send me an Angel"

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Given that we are now in a major economic down-cycle (to put it mildly), raising money for a startup is likely to get a lot harder. But the broad consensus I am picking up on is that private seed investors will become more important for early stage startups. Why? Because if your are an individual with a pot of cash, you are not going to look to the stock market to bring you high returns any more. So there is an argument to say that you could, instead, put it into a potentially high-growth tech startup. You just have to find that company. The other issue is that VC firms will be more interested in later stage companies, plus drive valuations lower, and cherry-picking the startups they want to work with. So Angels will be more important in this current market.

To that end, I am starting a regular feature, called “Send me an Angel”. This will profile Angel investors in the tech space and ask them a set of questions about their approach to investing. I won’t be publishing their contact details as a rule, unless they are happy for this to happen. Why? Because these people are being generous enough to lay out for you their investment strategy. They don’t want to get spammed. However, I guess if you can find them the rest is up to you…

Our first Angel is Michael Smith, founder of and CEO of MindCandy

Official Bio:
In his early twenties Michael co-founded the online retailer, The first product firebox designed was The Shot Glass Chess Set, an unusual fusion of chess and alcohol. The bizarre game became an instant best-seller and stimulated the rapid growth of the company. recently featured in 13th place on the Sunday Times Fast Track list of fastest growing companies in Britain. Not content with this business success, Michael launched Mind Candy in 2003, a developer on online reality games. Their first project Perplex City began soon after. Perplex City was a hit right up to February 2007 when the lost ‘cube’ was finally found. Michael is now taking Mind Candy in a completely different direction in the form of monsters! The new groundbreaking website allows children to adopt a pet monster on-line and learn and interact with other Moshi Monster owners.

1. What range of investments will you make in a startup? £50-100K? £100-200K, etc?

Sub £50k

2. What sectors will you definitely invest in right now? E,g, Consumer or Enterprise etc?

Consumer internet is where i’ve made all my investments to date. Anything I’d personally use is a big plus.

3. What sectors will you definitely not invest in right now?

Anything I don’t understand or am not excited by.

4. Outside of investment, what “value add” do do you think you bring to a young company or early stage team, e.g. is it you expertise, network, what?

Experience from a decade of running different web businesses and a strong US and UK network.

5. What combination of elements do you look for in the companies you choose to invest in? For instance do you look for people who have a sense of fun, and/or a great team, or an idea relevant to your own experience? What?

All my investments to date have been in friend’s businesses. I like investing in people I know, respect and trust. I don’t have time to review pitches from people I’ve never met before.

6. Do participate in syndicates/networks or in a round with bigger VCs, or do you “go at it alone”?

No preference.

7. How long do you foresee investing in a company for? 2 years? 5 years? What?

No set timescales

8. How has the current financial crisis affected your investment outlook? What’s your “runway” these days? (Runway is the length of time before the cash runs out before revenue kicks in to a startup).

Not changed things dramatically for me. Still very bullish on the web. Still believe there are huge opportunities out there. Deals are being priced a little more realistically now.

9. What level of involvement are you most comfortable being solicited for?

Very, very minimal. Am extremely busy with day job at Mind Candy so definitely not looking for board seats or deep involvement

10. What’s the “The Perfect Pitch” for you?

Someone I know pitching me on a business that I get instantly and could see my self personally using.

  • fletch

    Nice to see an Angel initiative Mike, and yes, you’re probably right that the tech startup market has the potential to provide investors with returns outside of the more traditional markets seen to be struggling at present.

    However, although I now know more about Michael Smith and his investment profile, I’m not going to find him on linkedin or whatever and then attempt to contact him. That would be simply rude.

    What if, though, you gave these Angels access to the data able to be submitted through your contact form and we knew this was actually happening? That could be automated so it wasn’t a time drain on you – and it would make a central repository of Angel Investment opportunities which in itself would be something of value.

    And you already have the ‘yes’ / ‘no’ button at the bottom of the form as well. Then we could follow the Angels you are profiling, keep a list as you build, and know they are glancing over our stuff.

  • Dashford

    A great idea. But I thought “Send me an Angel” was going to be about profiling a startup that is specifically looking for an Angel, not the other way round.

    Maybe it could work both ways:
    > “Send me an Angel” = profile of startup and their Angel funding requirements
    > “Show me an Angel” = profile of an Angel and their approach to investing

  • fletch

    Dashford – nice thought but the FSA might jump on that one. The research I’ve done leads me to believe that the startup profiles would have to be private, and even then, the people who do get to view them might have to be ‘certified high nett worth individuals’, or ‘self-certified sophisticated investors’. Might be nice to hear from someone actually from the FSA about this issue.

  • Why post that?

    I found the article pointless. ‘I only invest in my friends…’. Brilliant. To all those start up’s not friends with Micheal Smith tough luck.

    As more helpful approach would have been, send me 500 words and a few links. If I like it I’ll email you back to discuss. Otherwise what the point of telling us his strategy?

  • Andrew

    how is it pointless? its a pretty popular investment “strategy”. its not Michael’s job to be helpful to you. try businesslink for that…!

  • Robleh

    I don’t think the point is that you ring the guy up and he gives you cash. It’s more aimed at creating an understanding of what angels are looking for and what sort of help they can give.

    I think some entrpreneurs are fixated on money. I have found that access to networks and good advice is often far more valuable when you are building a product.

  • Mark

    It would be cool to see somebody to implement the simple webapp that would allow startups to “send Angels” to each other…

  • Mike Butcher

    @fletch – I don’t turn information into data. I turn it into media.

  • Fabrice Epelboin

    Brilliant idea Mike, I’ll be following this ‘send me an angel’ thing closely :)
    I totally agree with you, now that VCs are afraid, we’re gonna see angels taking over.

  • Jof Arnold

    Why are VCs “afraid”? Afraid of what? Who on earth started that stupid meme? I bet it was that YCombinator rabble ;-) ;-)

    If web tech startups don’t need big money any more – as everyone keeps saying* – then surely VCs will move to later-stage or other technologies rather than trying to shoe-horn their not-at-all-unsuccessful business model into something it doesn’t fit. Furthermore, aren’t VC’s actually better off by having more angels to take the hit on the poor/low-level investments? After all, an angel can do it for love but a VC does it entirely for the win.

    * On the subject of money, how many companies can you name in the last 5 years that have hit home runs without any VC investment? Now, I’m all for bootstrapping and self-funding, but that’s because my personal goals have little to do with “being the next google”. But if you want to be big, installing MySQL on EC2 doesn’t stop large tech companies from being expensive to run! I doubt many companies in this space are able to be monstrously successful without a few rounds of VC money.

    I digress, because what I came here to say was “thanks Mike; the article gave some useful insights into the angel investor world”.

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  • جÙ�Ù�

    Thank you and the subject site’s outstanding


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