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The fundamentals of business angel investment

Jim Curran, regional manager for HBAN in Northern Ireland, looks at some of the key learnings from a recent webinar, where some of NI’s top business angel investors shared their tips for anyone thinking of investing for the first time

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Jim Curran and Claudine Owens of Clarendon Fund Managers, which manages HBAN in Northern Ireland, are pictured with Yolanda Cooper, founder of WeAreParadoxx

Jim Curran and Claudine Owens of Clarendon Fund Managers, which manages HBAN in Northern Ireland, are pictured with Yolanda Cooper, founder of WeAreParadoxx

Jim Curran and Claudine Owens of Clarendon Fund Managers, which manages HBAN in Northern Ireland, are pictured with Yolanda Cooper, founder of WeAreParadoxx

Since launching HBAN in Northern Ireland in late 2018 I’ve had a lot of conversations with people who are interested in becoming angel investors but who don’t know where to start, aren’t sure what to invest in or who remain unconvinced about the quality of local companies to invest in.

The good news is that we have a number of very experienced investors in our local network who can provide sound advice on these matters and HBAN was delighted to host a new member session with some of them, namely Alastair Bell, Bryan Keating, Colin Reid and Mary McKenna.

The group all have successful exits in their own careers and some from their investment portfolios, so their guidance to anyone considering entering the world of angel investment is well worth listening to. Our conversation began on the topic of generating quality deal flow and how angels assess opportunities.

Mary McKenna, who co-founded a successful online learning company Learning Pool in 2006 and sold out her share in 2014, outlined her approach, saying: “I have two pots for investments. The first are all of the things that I love and care about, and the second are the ones that I know will make money. By working with HBAN I know that I get qualified leads, with an early stage valuation, and ultimately the decision on whether I proceed to work with the company comes down to the team and whether I believe that they can execute the plan they have created.”

Colin Reid, former head of Total Mobile, agreed that the team is fundamental to any decision to invest. “Before you commit to an investment you have to ask yourself, are they solving a real problem that people will pay money for? What is the exit potential? Six of my seven investments are in business software because I am comfortable in that sector and I know how I can add value to the company I have invested in.” he said.

When it comes to actually making and then managing an investment, Bryan Keating who co-founded CEM Computers in the 1980s and previously chaired Andor Technology plc , says the deal needs to feel right. “One of the critical moments in a deal is the signing of the term sheet. That’s when companies need to stand over all their claims and what they can’t. For example, their Intellectual Property. Despite the great coaching work HBAN does with these companies in advance of pitches, they are still immature and need guidance through the next stages of growth.

"If as a potential investor, you have any niggles of doubt at this point, then you should listen to your gut instinct and leave the deal. There will be others,” he said.

At HBAN we encourage angels to work together and many have done so. That can enable them to have a larger more diversified portfolio of investments. The investors on our panel all stressed that the role of a company’s board is fundamental in managing multiple investments. Alastair Bell spent over 30 years in Relay Software before becoming a technology investor.

He said: “When I enter into a transaction I like to know there will be a flow of information, including a quarterly board report to investors. I tend to ask a lot of questions rather than tell the companies I am working with how to operate. Ultimately, they are there to drive the business forward and they need to reach their own conclusions. Having multiple investors involved in a typical HBAN deal presents a safety in numbers appeal, reduces the risk and spreads the workload.”

Our role at HBAN is to help to develop and promote the local business angel sector and create opportunities for innovative entrepreneurs to meet and pitch their ventures to experienced angels is an important part of that.

The local investment landscape has changed dramatically in the last ten years and we now see a lot more investable opportunities well suited for business angels who are working together in groups and can support local businesses to scale. The outlook here is outstanding and there has never been a better time to consider becoming an angel investor. Those that do can count on sound advice from people already in the network who have been there and done it many times before.

Ulster Business