Lou Donnelly-Davey chats to Katherine Sandford from Enterprise Angels in Tauranga to get the low down on what drove her to become an angel investor and what some of the key considerations are for those thinking of doing the same.
Katherine’s a woman of many talents. A kind, smart and obviously ambitious woman who not only reached great heights in her 23 year global career in customer support, sales, and general management, but who was, once introduced to angel investing, hooked.
Katherine gave up a long term international tech career to come back home to New Zealand where she took up a role with New Zealand Trade and Enterprise (NZTE) as a Customer Manager. Knowing this would help reintroduce her back into the New Zealand business ecosystem, Katherine took every opportunity to attend events and network noting she’d often take three coffee meetings in any given week. Her time at NZTE enabled her to ease back into the NZ business landscape, plus gain valuable connections and learnings.Throughout this time she was exposed to elements of angel, venture capital and other funding mechanisms along with the associated programs on offer to New Zealand early stage ventures. This all came in handy when her investment advisor suggested that she might look at angel investment as part of her overall investment approach.
Why should you consider Angel Investing?
For Katherine, it was all about considering angel investing as part of an overall investment portfolio. When her investment advisor suggested that she add angel investing to her portfolio she somewhat brushed it aside, believing she didn’t necessarily fit the archetype of what she considered an angel looked like in New Zealand. Her local angel network did fit the traditional picture, however after attending an Auckland angel event, she saw lots of younger professionals getting involved which opened her eyes to the fact angel investing isn’t just for people of a certain age or a certain demographic. She realised it can be for anyone who has the capacity and willingness to do it, so she jumped in.
She says, if you’re looking for big returns in a short period of time angel investment is not for you. As a small part of a balanced portfolio for people with the requisite interest and risk appetite, there is a good fit however.
“Angel investing is not restrictive. It’s not for a certain age, or gender, or demographic. It’s for anyone.”
The other, possibly more compelling reason for Katherine was the opportunity to give back. Or in her words, the opportunity to be of service.
“Giving back is probably an overused phrase, in my own context I don’t feel like I want to necessarily “give back”, for me it’s more about “how can I help? How can I best serve the business and leverage the knowledge and experience that I have?”
Katherine says there is a huge opportunity for those who have had experience in business – onshore or offshore and particularly in the tech space to give back. Offering support and insight to fledgling businesses as part of a broader investment scenario makes so much sense.
What are some of the key things potential investors should know before they start?
Think, Portfolio: Angel investing is not a one off activity. You can’t just make one investment and expect to get returns. You must think of it as building a portfolio over a longer time frame.
Get Involved: You’ll get the most out of it if you’re prepared to put yourself into it. It might be that you will need 20+ investments to get a reasonable rate of return. You obviously can’t be involved in all of them, but you should be prepared to get involved in at least some on a deeper level. That might be at different stages, it might not necessarily be at the beginning, but later on in various forms. This could be as simple as being part of a due diligence team at the beginning of a deal or it could go as far as working as an executive or in Katherine’s case as an investor director, and eventually, Chair of the Board. That’s pretty full on immersion!
People First: Think people first, idea second. Always look for a founder who you can see yourself working well with, assess their ability to be coachable, and to build and motivate a team as much as their potential to develop the business. Often an average idea can go the full distance if it has the right human input.
“I tend to make my decisions very quickly and it’s almost always about the level of connection I feel with the person pitching”
Match Your Values: The more you put in, the more you get out of it. It’s really important to get a match with the companies you are choosing. Katherine says she’s learning as she goes along that alignment with her values is really important. Initially, she says she was looking at almost anything, but as she’s maturing as an angel, she’s now more conscious of aligning her investment strategy with her values and the things that are really important to her. Overall, have a plan. Think about what you actually care about and go from there.
“Over and above a great team and idea, it has to be solving a problem in a space that I care about.”
Alignment of Purpose and People: Align yourself with an Angel group that suits you. Do your due diligence on various clubs and groups. Your local group is a great start and will enable you to participate at the local level, and get involved in local opportunities. But as you learn and grow as an investor you become aware that the various groups have different approaches and there might be others that might suit you better and better align with your goals and objectives. The people that are involved, the way they go about things and the fee structures vary from club to club. Find one that feels like a good fit for who you are and what you are looking for.
How do you get started? What is the first thing you need to do if you’re considering becoming an angel investor?
Go to a meeting and a pitch night if you can, ask plenty of questions and find your tribe!
The first step is to get along to a member meeting, probably in your local area for a start. Angels are incredibly generous in terms of the information they will share, so ask lots of questions about the good, and the bad. Ask current investors about their strategy and approach to investing and what motivates them to be a part of this ecosystem.
Get a feel for how things are run and whether you feel like you’re part of that tribe or not.You’ve got to feel like you’re in the right place.
“I found it pretty intimidating at first – I was nervous, wondering do I really belong here? Sitting amongst who I thought were all these very wealthy people and thinking ‘that’s not me!, but the thing is, the whole construct of the angel investor is really quite warm and quite lovely.”
Katherine also recommends getting along to a pitch night to get a sense of how this works. It’s incredible to see things in action. And you’ll get a true sense of the real and raw aspect of what is actually happening. She adds that the level of human engagement is really quite exceptional.
“There was one particular pitch night I went along to and I thought “oh I quite like the look of that!”… It was right then that I got hooked really.”
The actual due diligence process process itself, working as part of a team of really capable people from different areas of functional expertise, was another great learning opportunity, Katherine explains. She goes on to say that, not only do you have the opportunity to invest in companies and great founding teams and ideas, but if you engage, you get to work with super talented people which results in incredible learning from a broad perspective.
What sort of people and what type of personality traits make a successful investor in your opinion?
In general, angel investors are givers, not takers. The most successful angels have a good nose for business but are also incredibly generous with their time. Katherine goes on to say, that those who take the time to get involved with the companies they are supporting get the most out of the experience both financially and from a broader perspective. That might mean a simple email of support off the back of a shareholder update or the time and attention that is devoted to supporting founders.
The top traits that make a great angel according to Katherine are someone who is deeply committed and extremely humble, someone who is almost invisible, behind the scenes, but in fact is making a real difference, someone who exudes warmth and humility and lastly, a person who has a genuine regard and care for people, as well as business.
What does success look like for you as an angel investor?
Success is two-fold for Katherine. Contributing to the success of New Zealand business is key. Katherine prefers to invest in companies that have a global trajectory and ambition, rather than those with a domestic focus.
Of course there is the financial return. But that’s certainly not the key driver for Katherine. She gets more of a buzz out of being involved and knowing that she’s adding value.
For Katherine personally, with her investment in Utility Electric Vehicle (UEV) company UBCO, she started with due diligence, got involved as an executive and board advisor, then became a director and now chairs the board.
“It’s been a real journey. I feel like a part of the team.”
It’s a feel good factor for Katherine, the fact that she knows that she is making a difference. Notwithstanding the financial and altruistic benefits, it has to be fun! Sometimes it’s definitely not, but that’s generally short-lived, and if you have a great relationship with the team and founders, she says you can make the most out of any situation.
Katherine used to think people who put angel investing on their profiles or on public platforms like Linkedin were a little pretentious and never thought it would be for her, but now she’s proud to be part of the angel community. She says angel investors fill a crucial gap in the ecosystem, which goes way beyond the club or local level.
“I now have a high degree of comfort being associated with this ecosystem and actually being called an Angel. Ten years ago I would have never imagined it.”
Be careful though! Angel investing can get you hooked and for Katherine this has led to her becoming a much more serious investor.
“I got hooked! Thats the great thing though, if you can find a great fit, the potential is limitless.”