Newsflash. You don’t need to be a millionaire to be an impact investor. There are all kinds of ways of investing your money today. You can invest in cryptos, buy NFTs, and you can, of course, invest in stocks. Still, in my experience, there is nothing like backing a company at the seed stage– especially when the company’s mission is to solve the world’s biggest challenges like clean water or clean air.
If you want to start angel impact investing, meaning backing companies that are solving today’s biggest challenges, you have so much choice today.
Following the journey of people who share your values and who have made it their mission to build a company from scratch is exciting and rewarding, and at the seed stage, you can make a difference with your capital.
Whether you want to back companies creating meat with almost no carbon footprint, capturing CO2 from the air, creating circular economy technologies or bringing affordable healthcare to the masses, you can become part of a new paradigm of ethical investing with as little as US$10,000.
When I was working for Techstars, one of the best technology accelerators in the world, I would overhear conversations between angel investors. As a consequence, I made three assumptions that were proven wrong in the last year:
- I assumed that all investors were millionaires. I felt intimidated, assuming angel investing was something for the elite that I wouldn’t be able to do before becoming a millionaire myself.
- I assumed I needed to know everything about business before becoming an investor, but all I needed was to develop expertise and a network in a sector I’m passionate about.
- I also thought that it wasn’t possible to make money in ways aligned with my values of striving towards sustainability and equality.
- I held on to the outdated assumption that making money and doing good in the world were mutually exclusive.
Also Read: COVID-19, the environment, and the tech ecosystem: what opportunity is available out there for us?
Helena Wasserman Eriksson
You can invest US$10K as opposed to US$25K in a startup
Typically, the smallest ticket size for an angel investor is US$25,000, but you can also back companies with US$10,000 or US$5,000 if you have something unique to bring to the table.
Ideally, you will want to build a portfolio of about 20 companies over five years, that’s four investments a year, a total of US$40,000 a year. This is so that you spread your risk and probability of returns.
If you’re wondering how to make this happen, you can reach out to accelerator programmes like Antler, Entrepreneur First or Techstars. You can also join networks of investors like Top Tier Impact (where I work), so you get access to quality deal flow.
There are also numerous events where startups pitch. You communicate how much you want to invest. Agree on the terms of the investment and done!
Returns happen where the business you invested in either gets acquired or goes public. It’s usually a five-to-eight-year timeline, so in that sense, you need a long-term investment perspective.
The idea is to follow on on investments that are doing well in subsequent rounds.
My point here is that you can invest US$10,000 in a good business, and they will happily receive it, provided you bring something unique to the table; a good value proposition to founders, sector expertise or a relevant network.
It’s also okay to start with more minor tickets and do a more significant number of deals.
Also Read: Why is impact investing suddenly so hot?
You don’t need to be an expert in all sectors. Just pick one focus
So what do you bring to the table? You don’t need to be an expert in everything. For some angel investors, it’s money only. For others, it’s their time or the introductions they can facilitate.
- Your network of potential advisors and investors is of vital interest to founders, and it can be formal or informal. I run an angel investor club called Stage 6, which opens the door to investment opportunities and gets investors to back companies on advantageous terms.
- Exposure and expertise: My friend Berenice Magitretti is both a journalist and an angel investor in femtech. She brings in money as well as sector-specific expertise.
- Localised knowledge and market trends: I have focused most of my angel investing on alternative protein because it made sense for me being based in Singapore, which is becoming one of the best ecosystems in the world for food technology.
Value alignment and adding value with your capital
In the last year, I have made three angel investments ranging between US$10 and US$25,000, two in funds and one in a startup. If you focus on one subsector, you will build expertise, and your due diligence will become easier and easier as you start to become knowledgeable.
So if you want to hack angel investing, think about the following: What can I bring to the table that would make my check ultra-valuable?
By focusing on alternatives to animal protein such as plant-based, cell-based and fermentation technologies, I am backing alternatives to the broken industrial agriculture system.
Investing as an angel impact investor is making a difference because that is the hardest capital to raise.
Also read: A wave of change: What sets impact investing apart from traditional investing
If you want to make a difference with your money, invest in companies pre-IPO that are tackling the world’s biggest challenges. Once a company is public and you buy shares, there is a lot of capital available.
Once you have started, you will quickly see that the real challenge is finding good companies to back, and you achieve that by building trusted relationships.
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