Is it Angel Training – or Angel Education?

Is it Angel Training – or Angel Education?

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I have received some comments from experienced Angel investors challenging whether the use of the word “training” is appropriate in the context of developing business Angel investment skills and knowledge.

It is suggested that the use of the word may actually be off putting to individuals who regard themselves as extremely successful business people.

However, the principal challenge to the use of the word ‘training’ relates to the impression it may give that on completion of a “training course” a novice will be fully skilled in all matters required to be a successful investor.

In practice the most significant impactful elements of Angel learning occur as a result of new Angel investors learning from experienced Angel investors while processing a live investment opportunity.

Angel investing is a practical rather than a theoretical activity. The term “training” often seems associated with learning that is done by rote and is somewhat prescriptive. i.e. There is a “right and a wrong” way of doing things.  Such prescription does not apply to the Angel investment environment, where there are many areas of disagreement, even between the most experienced Angel investors.

When Angels gather together there will be frequent discussions, and disagreements, as to the most appropriate forms of valuation (and the extent to which valuation is critically important or not in the investment process) the key factors of due diligence (typically between business opportunity and management team) and forms of investment (convertible notes versus preference stock) to name just a few areas of potential discord.

A preferred term may be “education”, which has a connotation of a continuing (lifelong) process, where the learners are encouraged to think about the concepts presented, and where appropriate to challenge them. Any point is open to discussion.

In developing the skills and knowledge of the Angel community it might be that encouraging education on a continuing basis, rather than suggesting Angels undergo training, which may be seen as a relatively one-off activity, would be more effective. 

The Reason Most Angel Training Misses the Mark

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The key role for “training” in emerging markets should be to provide nascent Angels with an understanding of tactics to deal with high risk, and thus confidence to join with others in making their first investments.

Technical training (Valuation, Financial Modelling, Due Diligence etc.) is a necessary but insufficient component of building this confidence. More vital are the elements that address critical risk factors.  These include the development of investment strategies that look beyond just the initial investment transaction, to the life-long funding requirements of the company, and post-investment support. We refer to this as “Strategic Angel Investing”.

Angel investing is a personal activity. Angelsinvest their own money in deals they select. They are free to conduct their investment activity in any (legal) way they wish.

A program must not try to impose a particular methodology or investment thesis, but rather find ways to support individuals to become confident to make investments in the manner that works for them. This does include using ‘best practice’ examples to demonstrate how others have become successful.

But ‘best practice is still subjective, and definitely needs to be adjusted to take into account the realities of local circumstance – the number of investors, availability of follow on and exits, the nature of deal flow and the like

Almost every aspect of Angel investing, from deal sourcing to exit, is subject to discussion about what methods, processes and techniques are most effective. The most effective learning comes from real life stories and examples, relevant to the region (tales of Silicon Valley are rarely appropriate), delivered by inspirational speakers, who are themselves experience investors. By which we mean not only that they have done some deals, but that they have taken a few companies through to a successful, profitable, exit.

An experienced and dynamic programme delivery team, who can adapt to local circumstance is the critical success factor.