SABAN Angel Investor Training & News Updates

It’s a particularly busy time in the South African entrepreneur-investor world over the next week as Johannesburg hosts GEC 2017 – the Global Entrepreneurship Congress. SABAN is co-hosting cocktails for investors and agripreneurs on Wednesday 15th March, contact us if interested in attending.

This afternoon SABAN hosts its first angel investor training session in Cape Town, where Newtown Partners Managing Partner, Llew Claasen, will unpack key principles and share from his many investment experiences. More below.

Looking ahead: Towards the end of March, Peter Jungen will be in SA, with decades of experience and legend-status in Germany. Join him for lunch in JHB on the 24th or dinner in CPT on the 28th.

And then, hot-off-the-press, in May we will have two ‘Women in Angel Investing’ evenings, more details to follow, Save The Date: 16th May JHB, 18th May CPT.

Angel Investor Training | Cape Town

Taking place at Rise, created by Barclays at the Woodstock Exchange in Cape Town this afternoon, we look forward to kicking off Angel training in SA. If you could not make this session, but are interested in future training, please contact us so we can guage interest and plan future events.

The session will cover everything you need to know to get started as an angel investor in SA, including: the setup process, identifying good opportunities, due dilligence, negotiating transaction terms, valuations, deal syndications, balancing your portfolio, your involvement as an investor, second-round financing and exits. The session will also look at best practices for maximising your returns.

Email for enquiries on last minute availability.

More details of the event are available at:

**Note: All proceeds go to SABAN. The South African Business Angel Network (SABAN) is a non-profit, industry association dedicated to growing angel investing in South Africa.

Peter Jungen Visits South Africa

Mr Peter Jungen, German Angel legend, is in town (ie. South Africa) for an Oppenheimer family moment late March and we will be hosting two informal meet-ups to hear his thoughts on the future of global angel investing. [100 word bio]

Check your diary: lunch in Johannesburg on Friday 24th March and dinner in Cape Town on Tuesday 28th March. Not to be missed.

Space is limited, if interested in joining contact Chris at with a winsome reason to have a seat at the table.

SABAN News & Updates:

– Investor Cocktails in Johannesburg at GEC 2017 on 15th March [Enquire]

– National Treasury Announces Relaxations on IP Exchange Control [Read]

Save the Date: Women in Angel Investing, 16 May (JHB) & 18 May (CPT)


SABAN Objectives:

– Raising awareness of Angel investing activity

– Capacity building / training

– Lobbying for regulatory improvements

– Seeding Angel Groups in major economic hubs

– Research

– Accreditation

– Networking

– Awards

5 lessons for (women) business angels

Sara Weinheimer, Founder of podcast series BroadMic looks at her top 5 lessons learned in years of angel investing. The article was published on linkedin.

When I first started out as an angel investor, I didn’t know any other women who were doing what I was doing. If you look at the data, my experience makes sense: In 2004, just 5% of angels were women; when I started out in 1997, there were probably even fewer.

So it’s only natural that everything I learned about investing, I learned from the guys. Not that it occurred to me then that I was learning to invest in a particularly “male” way. It’s only now, after nearly twenty years in the business—the last ten of which I spent investing specifically in women-led startups—that I realize just how important some of those lessons that I learned early on were to my success.

It’s not that men have some sort of secret playbook for investing that they hide from women. But what they do have is a strong network of—mostly male—colleagues and friends who pass on knowledge to one another such that it becomes second nature. If they did have a playbook, however, here are the top five things it would probably include:

Lesson 1: Bet on the jockey, not the horse

I can’t stress this one enough. It’s true that there will be good investments and bad investments, but at the end of the day, what you are investing in is a person more than a product. And if you don’t believe in that person—his or her ideas, talent, and ethics—then it’s going to be a poor investment of your personal capital—no matter how sound the business fundamentals are.

When you’re an angel, it’s not just money that you’re putting on the line: It’s an investment of your time, energy, social and intellectual capital. You have to ask yourself: Am I willing to spend my nights and weekends giving this founder advice? Will I go to bat for them? Will I put my own reputation on the line by connecting them to my network? In short: you have to ask yourself whether you believe in them and trust them.

Lesson 2: Deal flow trumps due diligence

A mistake I see many women angel investors make is thinking that doing more due diligence will lead to a higher probability of success. Due diligence can be a time-consuming and costly process, and many entrepreneurs have been advised—correctly—that they should make the fundraising “campaign” as short as possible in order to get back to running their business. Be sensitive to their reality.

Yet, there is a basic assessment of a company’s prospects that every angel investor must make in order to get comfortable with writing the check. But doing more homework does not necessarily equate to a better outcome. Instead, focus your energy on deal flow, which “is everything,” as prominent VC investor Marc Andreessen once put it.

The best entrepreneurs don’t just walk through the door—you have to go out and find them. It’s a lot of work. It’s hard to do on your own, which is why joining investor networks—whether formal or informal—can make sense. Here’s where doing the homework is important: Look at how well these investor groups do their job of attracting the best entrepreneurs.

Lesson 3: Diversify, diversify, diversify

It’s also a waste of time to try to be a great early-stage stock picker. A much better strategy is to place smaller bets on a portfolio of 20-30 companies, as a large majority of startups simply won’t make it—for any number of reasons—and you need to prepare for that. Early-stage startups are a much more volatile asset class than your average stock or bond: More than half of them will fail to return your invested capital.

By spreading your risk, you increase your chances of finding big winners (think Uber) that will more than compensate for your losses. Research confirms this: diversification is the single factor with the highest correlation to successful returns in early stage investing. Furthermore, the biggest hits don’t look like big hits early on.

Diversification matters not just at the level of your portfolio, but also upstream, at the source of your deal flow. You don’t have to join just one investor network; in fact, I recommend participating in several groups that are complementary in terms of industry sector, investment size, stage, process and membership profile.

Lesson 4: Know what you don’t know

One way to minimize—but not eliminate, that’ll never happen—losses is by developing relationships with people who understand the space you’re investing in. And I don’t just mean the company or product, but the entire space, whether it’s food delivery, social media or artificial intelligence. You can’t become an expert in everything, but, in the same way that the President has his or her cabinet, so do you need a network of people you trust whom you can call upon to advise you about your potential investments.

These people shouldn’t all look the same, and they don’t all need to fit a certain mold, (e.g., be professors or industry lifers). They just need to be people who have their finger on the pulse of whatever space your startup is disrupting. If it’s social media, for example, then it may be someone who’s a lot younger than you—because they sure as hell better understand how Snapchat works, especially if you, like me, are still not entirely sure what the big deal is.

Lesson 5: Be in it for the long haul

If you’re looking for quick returns, you’re in the wrong business. You should assume that every investment you make won’t yield returns for at least five to seven years (usually closer to 10). Of course, there may be some quicker exits, but for the most part, you should operate under the assumption that when you write the check, you won’t see the money again for a long, long time.

Just as your investment in the company is long-term, so too is your investment in its founder. Like in any relationship, there will be bad times along with good times, and the only way it can work is if you are willing to stick by the founders and help them work through their issues in whatever way you can. That can be through proactively making introductions to clients, talent, or other investors; offering strategic advice; or just periodically checking in to see how they’re doing.

Continuing to move forward in this space is a lofty, but worthy goal. When there are more female angels, more women-led companies get funded (about 20% today vs. 3% in 2004). The same is true in venture capital: the gender gap in startup success disappears when women fund women. When more of these companies get funded, everyone wins: the economy, thanks to the jobs that are created; and the consumer, who gets better products, thanks to the unique insights that women bring to innovation.

So let’s take this mythical “secret playbook” and make it our own. Network, share deal flow, find the best entrepreneurs, cultivate their trust, write checks, diversify…rinse and repeat!

Launch – Event Photos

SABAN launch press: SA Business Angel Network boosts early-stage investing

There is light ahead on the tough, dark road faced by local entrepreneurs, with the launch of the South African Business Angel Network (SABAN), a professional association for the early stage investor community reports Linda Doke for

In South Africa, more money is chasing fewer deals.

Mvi Hlophe SABAN  co-founder

SABAN is part of the African Business Angel Network (ABAN), a pan-African non-profit organisation founded to encourage and support the development of early stage investor networks across Africa.

Following the Johannesburg debut in August, SABAN launched in Cape Town last week. 

SABAN co-founder Chris Campbell said the organisation aims to provide a link between the local entrepreneurial ecosystem and investors, and grow a body of investors that can benefit from the strength of networking and collaboration.

Campbell is an SA-based entrepreneur who decided to replicate the work of EBAN (European Business Angel Network) in South Africa.

“The association will be set up as a trust, registered as a non-profit organisation. It will be an industry body which aims to galvanise and grow angel investment in South Africa. The keyword is collaboration – the creation of an angel investment ecosystem relies on successful networking,” he said.

Angel investors vs venture capitalists

Speaking at the Cape Town launch event, World Business Angel Investment Forum chairman Baybars Altuntas said business angels use private money to invest, while venture capitalists use the funds of the organisation they represent.

“There is strength to be gained in working together, particularly through a collaboration of minds and experience. It is highly risky to invest in a start-up as an individual. Through collaboration, angel investors reduce that risk,” said Altuntas.

“Knowledge, mentorship and networks differentiate business angels from other investors – they contribute their know-how, provide mentorship, and share their own networks to give the start-up the injection it needs. Angel investors are not just providing money, they supply smart finance.”

Altuntas referred to business angels as the leaders of the world’s early-stage investment market.

“In 2015 alone, about 300 000 angel investors in the US invested more than $25 billion in start-ups and SMEs. In Europe, it was €6 billion for that same period. It is estimated that the global market worth of angel investment already exceeds US$50 billion annually,” said Altuntas.

Connecting talent and money

Private equity investor Mvi Hlophe said increasingly in South Africa, more money is chasing fewer deals.

“South Africa doesn’t have the pipeline of quality entrepreneurs being funded at the seed capital stage. Angel investment bridges that funding gap,” said Hlophe.

Entrepreneur and SABAN advisor Vuyisa Qabaka believes that while the supportive environment for entrepreneurs in South Africa is gradually growing, the country needs more risk-takers to put money together towards talent.

“Talent should never have to look for money. Talented people with great ideas should be able to have a few conversations with the right people, in order for money to come to that talent. In South Africa, the access between entrepreneur and investor has been limited. Through SABAN, that gap will be bridged,” said Qabaka.

South African business woman and angel investor Audrey Mothupi sees the greatest potential for angel investment in South Africa in the financial technology space.

“What has been missing in our country’s entrepreneurial ecosystem has not been the creative ideas, energy or passion, but collective engagement. If SABAN can create the networking links across South Africa, we can partner and engage the African and European business angel networks to share ideas and ways to create even more opportunities for investment and for the creation of wealth for all,” said Mothupi.

SABAN is supported by the following partners and event sponsors: Newtown Partners, SA Innovation Summit, The Peninsula Hotel, OutsourcedCFO, African Business Angel Network, Entrepreneur Traction, StartUp Grind, Allan Gray Orbis Foundation, Silicon Cape and SiMODiSA. The SABAN founding committee consists of Mvi Hlophe, Bodo Sieber and Chris Campbell.

SABANlaunch press: SA needs more risk investors to seed SME growth

South Africa needs more risk investors, particularly those aimed at investing in talented black entrepreneurs that struggle to access mentorship and funding.

Written and published by Stephen Timm on

Speaking on Thursday at the Cape Town launch of the South African Business Angel
Network (Saban) Entrepreneur and SABAN advisor Vuyisa Qabaka (pictured below) said while the venture capital (VC) ecosystem is growing and the state is supporting this with the Section 12J tax incentive (see this post), South Africa needs more risk-taking investors.

“We need more more people to put in money in the early stages of the business, in that not so heavy level of R20,000 ($1,500), R40,000, R100,000 investment level (and for) syndicates to come together to put together money towards talent. That’s missing in our ecosystem,” he said.


Vuyisa Qabaka at the SABANlaunch (Photo Je’nine May / @SABANnetwork)

Qabaka added that while many white communities had friends or family who might be able to help seed their businesses, black entrepreneurs had few such people to approach for investment. “The question I have to ask is who is their uncle?”

He said angel investing could help fund and mentor rising talented start-ups.

South Africa has about 49,000 dollar millionaires who could potentially help seed new businesses and create jobs. In the US each angel investment added an average of 3.6 jobs, according to a 2014 estimate.

A 2015 report said 55 angel investments collectively valued at R42.5 million ($3m), were concluded in South Africa between 2011 and 2015. However the report likely failed to capture the large number of deals which are concluded under the radar.

‘Critical to SA’
SABAN steering committee member Mvi Hlophe said angel investing is critical to the country meeting its challenges of unemployment and poverty.


SABAN co-founder Mvi Hlope (Photo Je’nine May / @SABANnetwork)

As a private equity fund manager he sees an increasing amount of money is chasing fewer deals. Angel investing could therefore help seed a pipeline of deals, some of which could later migrate to receive private equity investment.

Hlophe says SABAN aims to bring together and accredit angel groups, allowing angels to invest together and in so doing find and validate better deals and lower their risk by spreading investment across various deals.

He says the organisation plans to run a set of angel masterclasses early next year. The group is in the process of registering as a non-profit.


SABAN launch Keynote Audrey Mophuti (Photo Je’nine May / @SABANnetwork)

Angel investor Audrey Mothupi has in the last two years funded a number of small businesses, including a Diepsloot gas distributor who has grown his business to employ 50 people today.

Two years ago she cashed in on her shares that she was given in Liberty Life while she was working at the company, to fund her angel investing endeavours,

Mothupi said missing in South Africa is a collective engagement about what “I can do”.

Turkish incentive
Perhaps a lesson is to be had for policymakers, in Turkey. A 2013 law allows angel investors a 75% corporate tax reduction should they hold company shares in recipient businesses for at least two years. It’s the biggest such tax exemption offered by any country in the world.

In addition angel investor can get 50% of their investment, matched by a $200m government co-investment fund, in which the government will provide an equity-free investment in a beneficiary.


Baybars Altuntas – Chair of the World Business Angel Investment Forum, Vice President of European Business Angel Network (Photo Je’nine May / @SABANnetwork)

Further to this the Turkish stock exchange Borsa Istanbul in 2014 launched an online matchmaking platform.

The “Private Market” platform ( allows entrepreneurs to find angel investors that have been registered and accredited by the stock exchange. It offers companies the opportunity to raise finance without going public while allowing company partners to sell their shares, and investors to liquidate their investments.

In the first half of 2015 the amount invested in early-stage investments grew by more than 200% compared to the same period in 2014, with the number of investments growing from 22 to 33, according to a tech blog.

Also speaking at Thursday’s event, World Business Angel Investment Forum chairman Baybars Altuntas, said there are now 400 angel investors accredited by the Treasury, with 16 angel networks (each with an average of 50 angels) now located in three cities.

Because of the difficulty of exiting from deals, it is difficult to convince global angel investors to invest in Turkish firms. To address this the government recently allowed global angel investors who can prove that they have been involved in a successful exit, to qualify for the same tax incentive in Turkey as citizens do.

‘Invite all players’
Altuntas, an entrepreneur who took part in the Turkish edition of Dragon Den, said back in 2010 he knew next to nothing about angel investing but ordered many books from on angel investing to learn more.

Later he met with President Recep Tayyip Erdogan to advocate for the incentive. His advice for convincing policymakers? “You have to find simple words to convince them.”

“I think Saban has to invite all market players to the same table – the stock exchange, the government – someone has to do it. And creating such an ecosystem will leverage the market in a very short period of time,” he advises.

Incentivising those with money, connections and experience to invest in start-ups or helping angel networks to set up (see this post) can only help small businesses in emerging economies to make a bigger impact. More governments should listen up.

Stephen Timm is a South African journalist and researcher who has been writing on small business and entrepreneurship in South Africa, Brazil, Chile, India, and Malaysia since 2003. He has written on small business for a number of South African newspapers, including Business Day and Mail & Guardian, and magazines, including Entrepreneur SA and Financial Mail.

Cape Town launch of the South African Business Angel Network

And launch of the Wall of Fame for Technology Enabled Businesses in the Western Cape

South Africa’s pursuit of a more equitable and growing economy requires exponential growth in entrepreneurial mindset and endeavour. Angel investors have a critical role to play in achieving this growth – they bring the networks, acumen and access to financing that catapults new businesses forward, dramatically increasing their chances of success.

Following a successful launch in Johannesburg in August, the South African Business Angel Network (SABAN) launches in Cape Town on Thursday evening 10 November at the Cape Town Club.

Headlining the launch are renowned international and local investors – Anthony Record MBE (global Angel investor extraordinaire), Audrey Mothupi (Board Member of Pick ‘n Pay and the Nordic Female Business Angel Network), Baybars Altuntas (Chair of the World Business Angel Investment Forum) and Daniel Guasco (Chair of Silicon Cape and Co-Founder of Team Africa Ventures). Tickets are available to investors via Quicket at

SABAN co-founder Chris Campbell explains that, “SABAN has been established as a non-profit, industry body to galvanise and grow Angel investing in South Africa.” Angel investors are typically high net-worth individuals who invest their own money in start-up companies in exchange for an equity share of the business. “Since the 2008 global financial crisis there has been phenomenal increase in the quantity and quality of Angel investors around the world – we are lagging behind in South Africa, to the detriment of our entrepreneurs. We need SABAN and other initiatives to change this narrative.”

Audrey Mothupi is unequivocal when she says, “Angel investing is the new normal, nothing creates impact and change than bringing passionate investors together with innovators from all walks of life – the one enables, and the other makes a dream a reality. Angel investors make tomorrow a reality today when that great innovation comes along. I am so proud to be part of the South African Business Angel Network, SABAN brings hope to all the great young innovators and, most importantly, has the ability to link local and global angel investors at a time when the world needs more inclusive globalisation to drive growth and impact.”

SABAN’s launch and early success is a result of collaboration by numerous individuals and organisations including the African Business Angel Network, Newtown Partners, Silicon Cape, SiMODiSA, Entrepreneur Traction, VC4A, Peninsula Hotel, SA Innovation Summit, StartUp Grind, Allan Gray Orbis Foundation, AngelHub Ventures, Clifftop Colony and Knife Capital.

Interested in attending the launch?

Go to or contact Chris Campbell – chrisc [at]

Wall of Fame for Technology Enabled Businesses in the Western Cape

Another exciting development for the SABAN launch is that the SA Innovation Summit will introduce and announce the opening of nominations for the Wall of Fame for Technology Enabled Businesses in the Western Cape. The nomination process will open on 10 November 2016 on SA Innovation Summit’s website ( The Wall of Fame aims to develop, through business community involvement, an aspirational culture for becoming technology entrepreneurs.


Harvard / MIT research on the Rise of Angel Investors

The Harvard Business School’s Professor Josh Lerner and Professor Antoinette Schoar of MIT Sloan School of Management published a paper that explores the rise of angel investing and compares it to venture capital.

Using data from two large angel startup groups, the authors were able to show results that encourages attention to this mode of financing. The study found that

“the angel group outperformed the venture capital industry overall.” Second, they found that “Startups funded by angel investors are 14% to 23% more likely to survive for the next 1.5 to 3 years and grow their employment by 40% relative to non-angel funded startups. Angel funding affects the subsequent likelihood of a successful exit, raising it by 10% to 17%.”

Lerner and Schoar explain the positive outcomes of angel investors by arguing that they provide “value added and hands-on improvement … rather than just access to funds.” The paper makes a good case for the use of angel investing as a way of improving the entrepreneurial ecosystem in a region.


Over the past 25 years, there has been an explosion of academic research, policy initiatives, and popular discussion about venture capital (VC) and venture capitalists. This interest is easy to understand: despite its relatively modest size, venture capital—consisting of investors who raise third-party money to make equity investments in young, typically privately held firms—have had a disproportionate impact on the U.S. economy. While venture capital-funded start-ups have made up less than one-fifth of 1% of businesses begun in the United States in recent years, the impact of these firms has been profound. For instance, when one compares VC-backed publicly traded companies founded between 1974 and 2014 to non-VC-backed public companies founded in same period, the patterns are striking. As of the end of 2014, VC-backed public companies made up 63% of market capitalization, 38% of total employees, and 85% of total R&D spending of the firms founded during this period.1

But in the rush to embrace VC investors, there has been a tendency to neglect other entrepreneurial financiers that critically affect the success and growth of new ventures. We focus in this essay on a neglected segment of entrepreneurial finance: angel investments. Angel investors have received much less attention than venture capitalists. But we argue that over the last decade they have become an important seed-stage funding source that is often complimentary to VC investors.

What are Angel Investors?

Angel investors are high-net-worth individuals, often (but not exclusively) former entrepreneurs and corporate executives, who make private investments in start-up companies with their own money. While individual angel investors have a long history—for instance, Naomi Lamoreaux and co-authors highlight how Cleveland’s angel investors played a critical role in financing the early electricity and automotive industries2—organized angel groups are a quite recent phenomenon. Beginning in the mid-1990s, angels began forming groups to collectively evaluate and invest in entrepreneurial ventures.

Who are angel investors?

  • Angels are high-net-worth individuals who use their personal wealth to make equity investments in private companies.
  • Angels typically invest at the seed funding stage, making them among the first equity investors in a company beyond its founders.
  • Angels often act as mentors to the founders of the companies in which they have invested.
  • Angels invested a total of $24.6 billion in 2015 with an average deal size of $345,390, according to the Center for Venture Research.

Who are venture capitalists?

  • VCs are firms who use funding provided by third parties, such as pension funds and university endowments, to make equity investments in private companies.
  • VCs mostly invest after the seed stage in a series of larger funding rounds. Their goal is to shepherd companies to an exit—either an Initial Public Offering (IPO) or the company’s sale.
  • VCs actively engage with the companies in which they have invested, usually taking board seats to influence company decisions.
  • VCs invested a total of $59.1 billion in 2015 with an average deal size of $13.5 million, according to the National Venture Capital Association.

Angel investors are increasingly structured as semi-formal networks. They typically meet at regular intervals (often over a monthly breakfast or dinner) to hear aspiring entrepreneurs pitch their business plans. The angels then decide whether to conduct further due diligence and ultimately whether to invest in some of these deals. Similar to venture capitalists, angel groups often adopt a very hands-on role in the deals they invest in and provide entrepreneurs with advice and contacts.

These groups are seen as having several advantages to their peers who invest alone:

  1. Angels can pool their capital to make larger investments than they could otherwise.
  2. Each angel can invest smaller amounts in individual ventures, allowing participation in more opportunities and the diversification of investment risks.
  3. They can undertake costly due diligence of prospective investments as a group, reducing the burdens for individual members.
  4. Angel investor groups are generally more visible to entrepreneurs and thus receive a superior deal flow.
  5. Finally, the groups frequently include some of the most sophisticated and active investors in a given region, which might result in superior decision making.

The Angel Capital Association (ACA) lists more than 300 U.S. groups in its database. The average ACA angel group in 2015 had 68 member angels and invested a total of nearly $2.5 million in 10.3 deals in 2007. At least between 10,000 and 15,000 angels are believed to belong to angel groups in the U.S.3

Angel groups follow mostly similar templates. Entrepreneurs typically begin the process by submitting to the group an application that may also include a copy of their business plan or executive summary. The firms, after an initial screening by the staff, are then invited to give a short presentation to a small group of members, followed by a question-and-answer session. Promising companies are then invited to present at a monthly meeting (often a breakfast or dinner). The presenting companies that generate the greatest interest then enter a due diligence review process by a smaller group of angel members, although the extent to which due diligence and screening leads or follows the formal presentation varies across groups. If all goes well, this process results in an investment one to three months after the presentation. Figure 1 provides a detailed template for one such angel group.

Figure 1: Tech Coast Angels Investment Process

Welcome to the #1 Angel network in the US. We are pleased you are attending an Orange County screening session. The screening process is an important part of the TCA process. Typically, we have over 300 companies per year apply over the web for TCA funding. Approximately one third of these companies make it to the screening process which you are about to participate in. Although each year varies, we typically fund between 10 and 20 companies per year. TCA consists of 4 chapters, each facilitating the first three steps of the deal flow process a little differently. The overall deal flow process for TCA consists of 7 steps as follows:

  1. Web Application – Entrepreneurs apply to TCA on the Internet. This process includes filling out a 4 page overview of their startup venture.
  2. Admin Screen – TCA staff perform a quick screen on the application to insure it is within the target area for a TCA venture. For instance, we typically fund between $250,000 and $1 million. If a company is seeking outside this range, typically they are not moved forward to pre-screen.
  3. Pre-Screen – In Orange County entrepreneurs present a brief overview of their company to 3-7 TCA members. This includes 5 minutes of presentation and 25 minutes of informal questions and discussion with the TCA members. At the conclusion of this session, the prospective company is moved to screening, or given feedback why they might not be a good fit for TCA.
  4. Screening – Typically 3 companies present at a screening. This consists of 15 minutes of PowerPoint and 15 minutes of Q&A. After the Q&A, we ask the entrepreneurs to leave the room and we discuss the company in private (typically takes 10-15 minutes). The entrepreneurs are invited back into the room, and a designated member provides quick feedback. Typically, the companies present at all 5 chapters. Therefore, it is possible for a company to get little interest at one chapter, but enough interest at another chapter that will allow it to move forward to due diligence. In Orange County we utilize a moderator to facilitate the sessions. This is intended to help balance questions for our members such that a member will not dominate the Q&A time. If you are a prospective member you are welcome to ask questions during the Q&A portion of the presentation.
  5. Due Diligence – A due diligence team is formed based on the number of interested members who signed up during the screening. A deal lead steps forward and helps coordinate the due diligence activities. Due diligence consists of verifying representations by the venture, customers, agreements, references, backgrounds, etc. The results of the due diligence process are posted on the TCA website (members only section), and if the results are positive, the venture moves forward to dinner meetings.
  6. Dinner Meeting – Companies that pass due diligence present at monthly dinner meetings at each chapter. This allows them to get in front of members who might not have seen them at screening or were involved in the due diligence process. This is the opportunity for the entrepreneurs to garner enough interest by members to secure funding.
  7. Funding – Funding occurs after there has been enough interest generated through dinner meetings and internal communication from the entrepreneur and deal lead. Members invest in deals individually, thus only a small percentage of members need to participate for the venture to secure funding. Typically, the minimum investment amount is $25,000.

Copyright: 2008 Richard Sudek

What Do We Know about Angel Investors?

The short answer to this question is “surprisingly little.” Researchers—in large part deterred by the difficulty of getting systematic data about these investors—have shied away from research on this topic. This neglect is unfortunate, as the last decade has seen a rapid expansion and deepening of the types of vehicles that fund start-up firms in the U.S. and worldwide. In particular, we have seen a growing role of angel groups and other more “individualistic” funding options for start-ups, such as super angels or crowdsourcing platforms. This trend has not only been prevalent in the U.S. but also in many other nations.4 One could argue that the funding of new ventures by wealthy individuals is one of the oldest forms of outside investment that exists, especially where capital markets and financial institutions are less developed. In this paper, however, we focus on the organized angel market as a growing form of start-up investing that is less formal than the VC market but more professional than receiving funding from friends and family.

The precise measurement of the total size of the angel investment market is difficult to ascertain due to the fact that most angel investments are made on an individual basis and thus typically are not subject to regulatory disclosure requirements. But estimates suggest that the total size of angel investment has long surpassed venture capital investment in the U.S. and increasingly in some other countries as well. For instance, survey estimates suggest the projected size of the total angel market in the U.S. grew from $17.6 billion in 2009 to $24.1 billion in 2014.5 The estimated capital deployed by angel groups in Europe has almost doubled over the past five years, and in Canada, it almost tripled.6 Some estimates suggest that these investors are as important for high-potential start-up investments as venture capital firms.7 But despite their rapid growth, we know very little about the role that angels play internationally and the type of firms in which they invest.

The appeal of angel investors is that they share many of the positive features of venture capitalists. They fund early stage entrepreneurs, undertake intensive due diligence of potential investments, and serve as mentors and (sometimes) outside directors for the entrepreneurs.8 But because angels invest their own money, they should be less prone to agency problems that have been documented for VC funds: for instance, fee-based compensation structures can lead to excessive fundraising or sub-optimal investment and exit decisions. The consequences of these agency problems may be periods of overfunding in certain sectors.9 Active involvement in the investments and close social ties between angels and entrepreneurs may help to overcome the lack of minority shareholder and legal protections that are important for the development of more decentralized capital markets.10 Reflecting these patterns, governments are increasingly seeking to encourage angel investment, as the OECD reports cited above document. The hope is to encourage alternative mechanisms for funding new ventures and to improve the ecosystem for entrepreneurs.

Relying on an idiosyncratic and decentralized angel investment process, however, might lead to challenges of its own. Since angels are typically not professional investors, there is a worry that entrepreneurs will be exposed to idiosyncratic funding risk, either because angels themselves might be subject to idiosyncratic liquidity shocks or because they might change their opinions more frequently about what projects to fund. Additionally, angels might not be prepared to invest in truly disruptive or high-growth projects, since they are usually more risk averse than institutional investors due to limited diversification. They also might not have the professional expertise to invest in more complex technologies. Finally, there is a concern that in countries lacking the culture or infrastructure to support start-up investments, angels only waste their time and money with no real impact.

Insights from Recent Work

The Impact of Angels on Start-up Success

In recent work, we have sought to better understand the impact of angel investors, both in the United States and worldwide. The challenge of such an evaluation is to separate the screening function of angels from their role of providing value added to the firms they fund. The former channel relies on the idea that angels might have access to better deals or are good at picking superior firms and, as a result, funded firms have better outcomes than nonfunded ones. In contrast, the second channel asks whether, above and beyond their ability to pick good deals, angels have an incremental impact on improving the performance of their start-ups, for example by mentoring the founders or helping them with introductions to their business network.

In our first paper on this topic, our analysis exploited very detailed, deal-level data of start-ups that pitched to two prominent angel investment groups on the east and west coasts of the U.S. (Tech Coast Angels and CommonAngels) to differentiate the different channels by which angels might affect the success of the firms they invest in. These organizations generously provided us access to confidential records of the companies who approached them, the level of angel interest, the financing decisions made, and the subsequent venture outcomes. The dataset allowed us to compare funded and unfunded ventures that approached the same investor using what economists call “a regression discontinuity approach.”11 Furthermore, we used the interest levels expressed by the angels to form specialized treatment and control groups that have similar qualities.12

Several clear patterns emerged from our analysis: First, and not surprisingly, the interest levels expressed by angels in deals were a substantial factor in funding decisions. Second, when we compared firms that received funding to those that did not within a narrow quality range, the funded firms overall look more successful than those that pitched to the angel group but did not receive it: They were 20%-25% more likely to survive for at least four years. They were also 9%-11% more likely to undergo a successful exit (IPO or acquisition) and 16%-19% more likely to have either reached a successful exit or grown to 75 employees by the end of our sample period. Funded companies had 16-20 more employees as of 2010, were 16%-18% more likely to have a granted patent, and are growing faster as measured through web traffic performance. Finally, funded companies were better financed. Overall, they had a 70% higher likelihood of obtaining entrepreneurial finance and had, on average, a little less than two additional financing rounds. These subsequent deals are often syndicated by the angel group with other venture financiers.13

Our third set of findings considered ventures just above and below the funding threshold. It confirmed several of our prior findings: ventures just above the threshold are more likely to survive and have superior operations in terms of employee counts, patenting, and web traffic growth.14

Interestingly, we did not find an impact of angel funding on follow-on financing when using the regression discontinuity approach. This difference to the estimates, based on a simple comparison between funded and nonfunded firms, may suggest that access to additional financing may not be essential for the success of angel-funded firms just above the threshold. But when looking at the full distribution of funded versus nonfunded ventures, the positive selection bias of receiving angel funding translate into a higher likelihood of follow-on funding. This result might also underline that, in the time period we studied in the U.S., prior angel financing was not an essential prerequisite to accessing follow-on funding. We believe that this result also underlines that the market for start-up capital during that time was very deep and liquid, and thus even ventures turned down by our angel groups found alternative funding mechanisms.

In a final step, we compared the returns of the venture capital industry to that of one of the angel groups. A natural concern is that these investments are by angels who are not professional investors, and thus their decisions and voting may be shaped by factors other than economic considerations (e.g., the joy of working with start-up companies). While our project focused on the consequences of financing for start-up ventures, this additional analysis helps confirm that the investments were warranted for the angel group as a whole. We found that the angel group outperformed the venture capital industry overall during the period of study.

Thus, this paper provided new evidence about an essential question in entrepreneurial finance. We were able to quantify the positive impact that these two angel groups had on the companies that they fund by simultaneously exploiting novel, rich micro-data and addressing concerns about unobserved heterogeneity. We should note, however, that the angel groups that we worked with for this project were two of the largest and most established groups in the country. They were both professionally managed, and at least one group outperformed the venture industry as a whole during the period we studied. Given the substantial heterogeneity across angel investors, the magnitude of the impact that we estimate is likely to be at the upper end of the angel population.

International Angel Groups

In a second, more recent analysis, we looked at angel investors globally.15 This paper seeks to understand the differences in the nature and consequences of angel investments across a variety of geographies that differ in the development in their venture capital markets and other forms of risk capital. We first ask whether angel investors improve the outcomes and performance of the start-ups in which they invest. Furthermore, we ask whether and how the types of firms that seek angel funding vary with the overall entrepreneurial ecosystem in a country. For example, does the pool of start-ups that apply for angel funding differ in their risk profile, development stage or industry concentration in places where the entrepreneurial ecosystem is less friendly?

For that purpose, we examine the records of 13 angel investment groups based in 12 nations and with applicants for financing transactions from 21 nations, examining both the applicants that were considered and rejected and those that were funded. To differentiate the value added of angel groups from their ability to select good investments, we employ the type of regression discontinuity analysis we used in the analysis of U.S. angel groups (described in endnote #11). We use discontinuities in the funding likelihood of start-ups that are based on a cumulative level of interest around the deal on the part of the angel groups. This allows us to examine not only whether angel investors add value to the companies in which they invest in general, but also how their impact and the types of transactions undertaken varies with the development of the venture markets in these nations.

Our key findings from the analysis of angel investing around the globe are twofold. First, angel investors have a positive impact on the growth of firms they fund, both in terms of their performance and survival. Start-ups funded by angel investors are 14% to 23% more likely to survive for the next 1.5 to 3 years and grow their employment by 40% relative to non-angel-funded start-ups. Angel funding affects the subsequent likelihood of a successful exit, raising it by 10% to 17%. Having angel funding also seems to matter significantly for the ability of a firm to obtain follow-on financing. This last result differs from the findings in our earlier paper, which showed that angel investments in the U.S boost start-ups’ survival and performance but do not impact their likelihood of future fundraising. This result suggests that angel groups outside the U.S. serve as an important accreditation or gateway for follow-on funding. Risk capital in the U.S. may be more abundant, and therefore start-ups have many different avenues of obtaining their initial seed funding, including venture capitalists. As a result, U.S. firms do not necessarily have to raise an angel round before getting funding from larger players.

Second, we find that the selection of firms that apply for angel funding is different across countries. In countries that have a less conducive entrepreneurial environment, companies seeking angel funding appear to be more established and are usually already revenue generating, compared to applicants in more entrepreneurship-friendly countries. Yet despite their apparent greater maturity, the firms in these markets seek smaller amounts of funding. We proxy for the entrepreneur-friendliness of a country with (1) the depth of the VC market as a fraction of GDP and (2) the number of regulatory procedures while incorporating a firm, taken from Djankov, et al. (2002). Given that these are countries with a less developed ecosystem for risk capital, it is difficult to believe that entrepreneurs in these countries have many other sources of capital. Instead, the results suggest that firms seem to “self-censor” when they apply to angel groups in the less venture-friendly markets, reflecting the fact that the angel investors themselves are more risk averse or less experienced in assessing very early stage investments. So despite being at a mature stage of their development, these firms receive less funding from the angels, which underscores the less favorable entrepreneurial investment climate in these countries.


This work suggests a variety of avenues for future research to better understand these important new investors. First, we have suggested that one way in which angel investors adapt to the changing investment environment across nations is by attracting and selecting different types of transactions. It would be interesting to examine whether angel groups also adjust in different ways, whether by varying the contracts they write with the entrepreneurs they fund (as we document that venture capital and private equity funds do in our earlier work) or by adjusting the intensity of oversight provided. In addition, we would like to understand better how these differences in the funding environment affects the selection of people who choose to be entrepreneurs. Another fertile area for research would be to examine how angel groups reacted to the rapid emergence and professionalization of venture capital funds, as has happened recently, for instance, in China and India.

We believe that our results on angel groups might also speak to some of the more recent innovation in crowdfunding platforms and the idea of providing a broader access to start-up investments to a broader public, where individual retail investors could participate in angel funding. This democratization of access has been a success in other industries: for instance, ridesharing platforms, apartment rental, etc. But our results strike a somewhat cautionary note for the application to seed-stage investing. First, even our results from some of the premier angel groups in the country show that there is a lot of risk and skewness in the returns to these groups. So investors have to be able to sustain such an investment profile. Second, and more importantly in our context, the major impact of angel groups lies in the value added and hands-on improvement that they provide to their start-ups rather than just access to funds. It will not be easy to replicate these impacts on a decentralized funding platform. In crowdfunding, investors are miniscule and are not in a position to provide the same value added to the investments. In fact, several crowdfunding platforms (for example, AngelList) have realized this and are experimenting with innovative funding structures where a few select investors act as syndicate partners, directing the investments of other (smaller) investors on the platform. The idea is precisely to facilitate the provision of value added service even in the decentralized online environment. There are several innovative new approaches being tested at the moment, but the jury is still out how investors will fare from these investments.

About the Authors

Josh Lerner is the Jacob H. Schiff Professor of Investment Banking at Harvard Business School, and head of the Entrepreneurial Management unit. He graduated from Yale College with a special divisional major that combined physics with the history of technology. He worked for several years on issues concerning technological innovation and public policy at the Brookings Institution, for a public-private task force in Chicago, and on Capitol Hill. He then earned a Ph.D. from Harvard’s Economics Department.

Much of his research focuses on venture capital and private equity organizations. (This research is collected in three books, The Venture Capital Cycle, The Money of Invention, andBoulevard of Broken Dreams.) He also examines policies on innovation and how they impact firm strategies. (That research is discussed in the books Innovation and Its Discontents, The Comingled Code, and the Architecture of Innovation.) He co-directs the National Bureau of Economic Research’s Productivity, Innovation, and Entrepreneurship Program and serves as co-editor of their publication, Innovation Policy and the Economy. He founded and runs the Private Capital Research Institute, a nonprofit devoted to encouraging access to data and research about venture capital and private equity, and serves as vice-chair of the World Economic Forum’s Global Agenda Council on the Future of Investing.

Among other recognitions, he is the winner of the Swedish government’s Global Entrepreneurship Research Award. He has recently been named one of the 100 most influential people in private equity over the past decade by Private Equity International magazine and one of the ten most influential academics in the institutional investing world by Asset International’s Chief Investment Officer magazine. He currently serves as Vice Chair of the World Economic Forum’s Global Agenda Council on the Future of Investing.

Antoinette Schoar is the Michael M. Koerner (’49) Professor of Entrepreneurial Finance at the MIT Sloan School of Management and the Chair of the MIT Sloan finance department. She holds a PhD is in Economics from the University of Chicago and an undergraduate degree from the University of Cologne, Germany. She is an associate editor of the Journal of Finance and the co-chair of the NBER Entrepreneurship group. Her research interests span from entrepreneurship and financing of small businesses in emerging markets to household finance and intermediation in retail financial markets. She received several awards including the Brattle Prize for best paper in the Journal of finance and the Kauffman Prize Medal for Distinguished Research in Entrepreneurship in 2009. She has published numerous papers in the Journal of Finance, Journal of Financial Economics, the Quarterly Journal of Economics and others. Her work has been featured in the Economist, the Financial Times, the New York Times and the Wall Street Journal. She also is the cofounder of ideas42 a non-profit organization that uses insights from behavioral economics and psychology to solve social problems.

SABAN launches in Johannesburg

SABAN (South African Business Angel Network) is a non-profit, professional association for promoting the South African early stage investor community. Established in 2016, SABAN represents a sector that plays a vital role in South Africa’s future, notably in the funding of Start-Ups. SABAN members fuel SA’s growth through the creation of wealth and jobs

The organization has the following objectives:

– Raising awareness of Angel investing activity
– Capacity building / training
– Networking with peers
– Research
– Accreditation
– Seeding Angel Groups in major economic hubs
– Lobbying for regulatory improvements
– Recognizing Angel achievements

The formalization follows the launch of the African Business Angels Network (ABAN) in the fall of 2014, and is another step in a growing movement to evangelize an angel investing movement across the continent.

To put the South African economy in context – the country is characterized by extremely high unemployment and low GDP growth, so entrepreneurial initiative is greatly needed to boost the economy. And where there are entrepreneurs, there must also be business angels. While private angel groups and small syndicates do exist in the country, SABAN is the first national non-profit network. Additionally, there is little data regarding business angel activity in the country, however, their number is surmised to be somewhere between 20 and 50 publicly known business angels. Working closely with these individuals, and their related investing groups, SABAN aims to increase the amount of information available on early stage market players in South Africa.

Many of the key individuals helping drive SABAN forward are familiar to EBAN – Audrey Mothupi (NFBAN Board Member), Craig Mullet, Anthony Farr, Vuyisa Qabaka, Alexandra Fraser, Dean Cannell, David van Dijk, Ben White, Tomi Davies, Llew Claasen, Matsi Modise, Elizabeth Gould, Garreth Bloor, Anthony Record, Christophe Viarnaud, Rebecca Enonchong, Abu Cassim, Candace Johnson and Baybars Altuntas.

The first concrete conversations on starting SABAN started as recently as May 2016, but there has been incredible progress so far. Among those consulted and supportive so far are the Johannesburg Stock Exchange, Newtown Partners, Allan Gray Orbis Foundation, Entrepreneur Traction, GBAN, Silicon Cape, SiMODiSA, VC4Africa, Clifftop Colony, Knife Capital, SA Enterprise Development, DEMO Africa, Venture Networks, French Tech Hub, Methys and Jozi Angels. Early support has also been shown by the South African Department of Trade and Industry, who attended EBAN’s Annual Congress 2016 in Porto, and are willing to help connect SABAN with the European Commission.

Another, even bigger launch event for SABAN is set to take place in November in Cape Town, and by early 2017 SABAN is expected to be in full force. The organization is headed by a steering committee of Chris Campbell, Bodo Sieber (CEO of Tagmarshal, which recently received German angel investment) and Mvikeli Hlophe (fund manager at SA Enterprise).

SABAN (South African Business Angel Network) is the non-profit, professional association for the South African early stage investor community. Established in 2016, SABAN represents a sector that plays a vital role in South Africa’s future, notably in the funding of Start-Ups. SABAN members fuel SA’s growth through the creation of wealth and jobs.

SABAN JHB Launch – A Promising Step for South Africa

With the South African Business Angel Network – SABAN – launching in Johannesburg on August 24th, 2016, South Africa can claim its first national non-profit association whose purpose is to “galvanize and grow angel investing” in the country.

Chris Campbell is an entrepreneur based in South Africa who has been on the front line of SABAN’s creation. Through his experience pitching and going through funding rounds, Chris saw the need to make it easier to connect South African entrepreneurs and business angels. The inspiration for him to get involved personally came after the EBAN Winter University 2014 in Helsinki, Finland, which enabled him to see what was being done in other countries and that it could be possible for South Africa as well.

Chris is quick to mention that ABAN – the African Business Angel Network – has been instrumental in providing support to get SABAN off the ground. ABAN spans the whole continent and is envisioned as a “network of networks”. However, it is also in the unique position of helping develop national and regional networks itself, in which regard SABAN will certainly be a testament to its success. The Finnish Business Angels Network and Lagos Angel Network both provided helpful examples to follow as well, for the task of creating a business angel network. And, ultimately, at the Global Entrepreneurship Congress 2016 in Medellin, Colombia, several South African stakeholders, including Chris, came together to acknowledge that the angel investment ecosystem in their country would be difficult to grow organically unless a catalyst – such as a national network – was introduced.

The first concrete conversations on starting SABAN started as recently as May 2016, but there has been incredible progress so far. Among those consulted and supportive so far are the Johannesburg Stock Exchange, Newtown Partners, Allan Gray Orbis Foundation, Entrepreneur Traction, GBAN, Silicon Cape, SiMODiSA, VC4Africa, Clifftop Colony, Knife Capital, SA Enterprise Development, DEMO Africa, Venture Networks, French Tech Hub, Methys and Jozi Angels. Early support has also been shown by the South African Department of Trade and Industry, who attended EBAN’s Annual Congress 2016 in Porto, and are willing to help connect SABAN with the European Commission.

To put the South African economy in context – the country is characterized by extremely high unemployment and low GDP growth, so entrepreneurial initiative is sorely needed to boost the economy. And where there are entrepreneurs, there must also be business angels. While private angel groups and small syndicates do exist in the country, as mentioned, SABAN will be the first ever national non-profit network. Additionally, there is little data regarding business angel activity in the country, however, their number is surmised to be somewhere between 20 and 50 publically known business angels. On a related note, SABAN also aims to increase the amount of information available on early stage market players in South Africa.

Another, even bigger launch event for SABAN is set to take place in November in Cape Town, and by early 2017 SABAN is expected to be in full force. The organization is headed by a steering committee of Chris Campbell, Bodo Sieber (CEO ofTagmarshal, which recently received German angel investment) and Mvikeli Hlophe (fund manager at SA Enterprise).

Many of the key individuals helping drive SABAN forward are familiar to EBAN – Audrey Mothupi (NFBAN Board Member), Craig Mullet, Anthony Farr, Vuyisa Qabaka, Alexandra Fraser, Dean Cannell, David van Dijk, Ben White, Tomi Davies, Llew Claasen, Matsi Modise, Elizabeth Gould, Garreth Bloor, Anthony Record, Christophe Viarnaud, Rebecca Enonchong and Abu Cassim. Candace Johnson and Baybars Altuntas have both been in contact with Chris regularly helping provide additional impetus to SABAN.