Mark Lyttleton has invested in and supported numerous fledgling businesses created with a focus on creating a positive planetary impact, including Scoot, Clim8, C-Cell, Maanch, and Ohm Energy. An experience business mentor, professional speaker, and angel investor, Mark Lyttleton provides business founders with not just financial support and business advice, but provides personal mentoring, helping founders to cope with the considerable pressures involved in establishing and growing a successful business. This article focuses on the role of an angel investor, exploring the different types of support they provide to early stage businesses.
Also known as a business angel, seed investor, or simply a private investor, an angel investor is someone who provides the capital needed to get an early stage start business up and running. In return for their investment, angel investors usually receive equity or convertible debt in the company. Angel investors can offer more than merely financial support, providing founders with advice on establishing and growing their business. Typically well-connected, angel investors also provide fledgling businesses with access to an extensive network of valuable industry contacts.
Angel investing incurs a high degree of risk, supporting early stage businesses that lack business pedigree. Angel investing therefore requires a higher rate of return compared with other investment opportunities..
Mark Lyttleton cites patience as a key attribute for any angel investor, explaining that deals almost always take longer than originally anticipated to come to fruition. In addition, he recommends diversification, explaining that while focussing on a single industry and core competency can be a valid strategy for many, he prefers to diversify, since it offers scope to learn about and potentially benefit from new industries and themes, as well as providing a degree of protection if a particular industry blows cold for a couple of years and values start to fall. Mark Lyttleton enjoys getting involved with the businesses he supports, helping them to overcome strategic challenges, make connections, and attract new capital, but recognises that not every investor likes to do this as it can be quite time consuming.
From a business owner’s perspective, working with a business angel offers a variety of advantages, including:
- A speedy decision process compared with traditional bank loan application processes.
- No need for collateral.
- Better business discipline due to enhanced outside scrutiny.
- Potentially no interest or repayments.
- Access to business angel mentoring and management skills.
- Access to the investor’s valuable network of contacts, including potential employees, and customers, as well as professionals such as accountants, lawyers, and investment bankers.
- Credibility from being associated with a particular investor.
Working with a business angel typically involves giving up a stake in the business. It is therefore not a decision that should be entered into lightly. However, most business angels are businessmen and women themselves, having created their own business empires and amassed considerable personal wealth. Working with business angels helps founders to access not just their financial support, but their know-how, experience, and contacts; potentially helping them to establish and scale their business better and faster.
From an angel investor’s point of view, working with early stage businesses also has its rewards, providing an opportunity to:
- Meet and support interesting people with innovative new ideas, creating scope for not only new business connections, but true, long-lasting friendships.
- Support causes they care about, be it helping alumni of their old school or university, or supporting underrepresented demographics, such as black and ethnic minority-owned businesses.
- Pass on their business expertise and experience to the next generation of entrepreneurs.
- Diversify their investment portfolio by investing in appealing start-ups.
- Learn new skills and apply current skills in a new way.
Shrewd private investors understand the risks and rewards involved in angel investing. Although getting involved with early stage, unproven ventures can be fun and rewarding, it can also be financially risky. Savvy angel investors carefully hone their own personal investment strategies, investing in several enterprises rather than ploughing all of their funding into one company to mitigate the risk of losing money.