This is the second installment of a three article series focused on launching an angel group.
When delving into the realm of angel investing, it is essential to understand the pivotal role of an angel group manager in orchestrating due diligence, managing deal flow, and overseeing portfolio management. This article sheds light on the multifaceted responsibilities of these managers and emphasizes the significance of implementing streamlined workflows for effective angel investing. Read on to explore the intricacies of angel group management and the key strategies for success in the dynamic world of angel investing.
Building a Due Diligence Process
Due diligence stands as a cornerstone for informed decision-making and risk mitigation. Angel group managers play a big role in overseeing this crucial process, ensuring thorough research and analysis are conducted before making investment decisions.
To facilitate this, specialized tools and platforms tailored for angel group managers have emerged, enabling them to streamline the due diligence process effectively. We’ve created a Due Diligence Report Template specifically for this purpose. The template provides clear guidelines for you and your angel group to follow to make sure the companies you are reviewing check all of your boxes.
By implementing structured steps within an angel group setting, managers can enhance efficiency and accuracy in evaluating potential investment opportunities. In a previous article, we mentioned the 14 key factors of due diligence. These factors are the stepping stones to understand the companies you are researching and will lay a foundation to fully grasp what you are looking to invest in as an angel group.
According to an article posted by 4Degrees, “...data shows that angel investors spending fewer than 20 hours on due diligence activities per deal saw an overall return multiple of 1.1x IRR in 3.4 years, while those that dedicated north of 20 hours had a return multiple of 5.9x in 4.1 years.” This goes to show that Due Diligence shouldn’t be looked over, and it needs to be prioritized within your angel group.
When it comes to due diligence, clarity and structure are essential. Defining who will be conducting the due diligence is crucial to ensure that the process is thorough and comprehensive. Establishing a cadence for due diligence helps to maintain momentum and ensures that all necessary steps are completed in a timely manner. Some angel groups may choose to form committees or engage external experts to assist with due diligence.
A great example we’d like to highlight is Astia’s Expert Sift Process. Essentially, they have a clear, 6 step outline of their due diligence process that includes an application, multiple screenings and a final verification process that ensures they have their bases covered when conducting their due diligence.
Keeping Track of Deal Flow
Deal flow management plays a pivotal role in the operations of angel groups, serving as the driving force of successful investing. Angel group managers are tasked with understanding the intricacies of deal flow management, which involves the process of sourcing, evaluating, and selecting potential investment opportunities. By effectively managing deal flow, angel group managers can ensure a steady stream of high-quality investment prospects for their group.
There are specific tools and techniques tailored to the unique needs of managing deal flow within an angel group context. These tools range from deal flow management software platforms to customized databases that streamline the process of tracking and evaluating potential investments. By leveraging these tools, angel group managers can enhance efficiency, collaboration, and decision-making within their group. Additionally, techniques such as pipeline management, deal screening criteria, and due diligence frameworks are employed to effectively manage deal flow and ensure that the group focuses on the most promising opportunities.
As an angel group, sourcing deal flow is crucial to attracting potential investments. You will need to market your group at places like universities, conferences, and local accelerators just like any other organization. By actively seeking out promising startups and entrepreneurs, your angel group can showcase their expertise and network to attract high-quality deals. This process not only helps angel groups identify investment opportunities but also allows them to build relationships with founders and other investors in the industry. Ultimately, sourcing deal flow is essential for angel groups to establish themselves as reputable and valuable players.
To navigate the influx of investment opportunities, angel group managers employ strategies for organizing and prioritizing deal flow effectively. This may involve categorizing deals based on industry sectors, investment stages, building a diverse portfolio, or risk profiles to facilitate informed decision-making. By establishing clear criteria and processes for evaluating deals, angel group managers can ensure that the most promising opportunities receive the attention they deserve.
Software that can be customized for managing deal flow, like Airtable, traditional CRMs (Hubspot or Salesforce) and Dealum, are game-changers for angel groups and investors. These tools make it easy to track and manage potential investment opportunities, keep tabs on communication with founders, and streamline the deal sourcing process. Airtable's customizable features allow users to organize deal flow data in a way that works best for them, while traditional CRMs offer robust functionality for managing relationships and tracking deals. Dealum, on the other hand, provides a specialized platform tailored specifically for deal flow management, offering unique features to enhance the investment process. With these tools at their disposal, angel groups can stay organized, efficient, and ahead of the game in sourcing and evaluating potential investments.
Recognizing the need for early stage investors to manage their pipeline of investments, we, at Seraf, developed a fully customizable deal flow management tool to efficiently track, evaluate and analyze your pipeline of investment opportunities through the different stages of your deal flow process. It nicely integrates with our portfolio management platform so investors can have one place for all their investment activities.
To learn more about Seraf’s deal flow management and portfolio management for early stage investors, please check out our Enterprise Solution and request a demo.
Keeping Tabs on the Portfolio Post Investment
It is essential for managers to continuously track the performance of their investments to assess their financial health, identify potential risks, and make informed decisions for portfolio optimization. By staying vigilant and proactive in monitoring their portfolios, angel group managers can effectively manage their investments and maximize returns for their group members.
There are specialized tools and software designed to streamline the tracking and analysis of portfolio performance. These tools cater to the unique needs of angel group managers, offering features such as real-time data updates, customizable reporting, and performance benchmarking. By using a portfolio management application, managers can gain valuable insights into their portfolio dynamics, make data-driven decisions, and enhance their overall investment management capabilities.
When establishing a portfolio monitoring system within an angel group, it is crucial to follow best practices to ensure its effectiveness and efficiency. This includes defining clear investment objectives, establishing key performance indicators (KPIs) for monitoring things like number of employees, revenue, ARR and net income and defining the frequency of KPI requests (annually, quarterly or monthly), implementing standardized reporting processes and fostering a culture of transparency and collaboration among group members. By adhering to these best practices, angel group managers can create a robust portfolio monitoring framework that supports informed decision-making and drives investment success.
Integration of Workflows for Angel Group Managers
The role of an angel group manager is multifaceted, requiring adept management of the 3 points listed above. These three key components intersect seamlessly in the manager's responsibilities, each playing a crucial role in the success of angel investments. Due diligence involves thorough research and analysis of potential investment opportunities, ensuring informed decision-making. Deal flow management focuses on sourcing and evaluating new investment prospects, while portfolio monitoring entails tracking and managing the performance of existing investments. The integration of these workflows is essential for the effective oversight and strategic decision-making of an angel group manager.
Conclusion
In conclusion, navigating the intricate landscape of angel investing requires a deep appreciation for the indispensable role played by angel group managers. As the overseers of due diligence, deal flow, and portfolio management, these individuals are instrumental in shaping successful investment outcomes. By emphasizing the importance of organized efficient workflows and strategic decision-making, this article highlights the essential practices that underpin effective angel investing. As you continue your journey of angel investing, remember to leverage these insights and strategies to maximize your potential for success in this dynamic and rewarding field.
Next, we’ll cover Effective Angel Group Member Management.
