How Angie Communications became the world’s largest angel-funded startup
I have been in business since 1988, joining my father and a brother in their business. I couldn’t stand being an unpaid servant to them without any potential real reward on the horizon, so I left. A few months later, in 1989, at age 19, I borrowed the equivalent of US$30,000 from my foster dad to buy my own small eatery. This man is in many ways an angel to me (a story for another time, maybe). I am not sure whether there was a term for such a lender back in those days, but now I like to refer to him as my first angel investor. I also got another investor who loaned me around $7,500, but that was a business deal.
Fast forward to 2015, in my 26 years of business I have raised a huge amount from angels. I think I have dealt with around 200 angels, ranging from investments of a few thousand dollars to a few hundred thousand dolllars.
The majority of the angel money I got has been invested in Angie Communications and its direct predecessors. Recently, an independent valuation expert valued just one of our project companies (Angie UK) at a present valuation of €3 billion. How that came about can be read on page 44 etc. of our Blueprint (click here for the blueprint, and here for an article I published on Linkedin). This means that our angels are set to realize a truly hefty return, but there are a few conditions (some would say: catches). For example, the return depends on timing.
I have nothing against Venture Capitalists (or professional, organized super-Angels), but I think nowadays it is even easier for entrepreneurs to get large amounts of money through a large group of individuals. Crowdfunding is a great opportunity, whether through a platform or through your own (offline, real world) network. We still get angel investment requests almost on a daily basis, and that has increased since we sent out our Press Releases.
In this article, I will briefly lay out the how, what, why etc. that may also be relevant to entrepreneurs or startups that are looking for funding.
The following comes to mind when you want to stand out from the crowd of entrepreneurs who are also chasing angel investments.
Angels are not mythical beings
In financial terms, angels are people who lend you money and hope that you will be able to pay back, hopefully with a nice interest and bonus.
Usually, angels are people whom you know very well or get to know pretty well prior to getting any money. This is also one of the most important aspects of approaching angels. They have to believe in you and your story. They have to trust you and your capabilities, and that may take some time.
Be prepared to the best of your ability.
- - It is very important to separate yourself from being John the joker at family parties. No matter how much your family and buddies love you, they won’t give you money if they think you’re going to spend it all on crazy stuff. Instead, when the time comes to pitch them in person, make sure that you can break things down to them in easy to understand language, yet also showing that you really have a good idea/plan.
- - In your “investor kit”, the first piece of material you point them to is a one-page summary that tells the story in a quite convincing way, but also leave them wanting for more information. That should then be in your presentation (use prezi or powerpoint). The more professional your information looks, the more likely it will be that your aunt and uncle and buddies realize that you are serious about this and have invested time and effort in it.
- - There should be some sort of documentation (an executive summary of a few pages or a full-fledged business plan). It is most likely that the potential angels won’t study your documents inside out, but it is a good thing that you can refer to page x-y-z when questions are asked.
- - Make sure there is an online source (your website maybe) where all material can be accessed from.
- - It would be great if you have one or two co-founders or ready-to-roll people who can do the pitch/presentation with you. People like to have confirmation from others than you who believe in the same thing. Don’t underestimate this.
Divide the pie
- - If you need $100,00, you will most likely need to raise that from more than one or two people. Rather than looking at the amount only, look at the number of people you could reach and potentially convince to invest. Let’s say you have a direct (1st degree) and 2nd degree network of around 100 people. You will have to try to reach and meet all of them, but only 20 or 30 may be willing to hear you out. And only 10 or 15 may really invest, if you are lucky.
- - In this pie, not all slices have to be the same size. Instead, do something like this: 30 units of $1,000 each (=$30,000), 7 units of $10,000 each. This way you get to your $100,000 goal without being a huge financial risk to your angels.
What is in it for your angel?
I don’t really believe in (convertible) loans. Instead, make life easier by offering equity in return for their money plus paying back the money.
- - In our last angel round, we did the following: we promised our angels their principal back (under conditions) after one year (but not sooner) of their investment at 110% plus 10% interest. This means that the total amounts to 120% after just one year.
- - However, we also gave the same angels the right to hold their equity (or parts of it) and sell in 5 years at the then present value, which would then be established by an independent valuator.
- - As of yet, we didn’t need to pay back any angels because none of them requested the payback of principal. Why? Because they rather go for the jackpot, which will be the increased value in the near future.
- - I pride myself in the way we communicate at Angie. It is open and transparent. All people know each others email addresses. We even have whatsapp groups. This takes away the pressure of updating. Our updates are infrequent but always a signpost: this happened, that has been achieved, this person joined, that company wants a strategic partnership.
- - This makes angels not only part of the conversation but also a kind of “part of the team”. For example, one of our angels is Hollywood actor Rutger Hauer. He is included in most of our team communications, and when he deems fit, he'll respond - at his own pace. It must be said that his position is a bit special since he is also our Creative Advisor.
The potential downside of having (many) angels
- - The upside for having (many) angels is, obviously, the money you have raised from them. The other potential upside is that you have a bunch of free advisors now. In fact, they paid you to advise. I haven't come across any angel who couldn't advise on at least one particular issue, wheter it be accounting, marketing, legal, sales, design.
- - The downside is that –in general- you may have to invest lots of time in meetings, following up.
- - I have often heard that the more angels you get, the more you are likely to be sued by an unhappy angel. In my experience, that is utterly nonsense. You have to get your agreement in order before you accept any money. But more importantly, you have to communicate with your angels about expectations, rewards, risks, and timing. It would be wise if you include those things in your documentation and agreement (we had our official Sales Document and sales agreement set up by a law firm).
So, in summary, go for it!
Update April 14, 2017: We've decided to launch Ambassadors and Angels programs for our Dutch Wireless Extreme projects on a per-city basis. We hope to beat the competition even faster with the energy of our ambassadors and angels. Our Early Adopters (Extreme Pioneers, as we call them) get certificates of shares at no extra cost at the time of placing their Wireless Extreme order, Angels must purchase them. Read the Information Memorandum for Wireless Extreme Rotterdam here.
Rotterdam is the first of Dutch cities where we'll launch such programs. This offering is exempt from securities regulations. While we'd like to reward our customers everywhere, we are not yet sure whether we can and will launch such programs for our UK and USA projects.