Ask HN: best way to (indirectly) invest in a startup via angel/seed fund?
Background of question:
I am in the fortunate position of recently exiting a business I co-founded in 2002 in the UK healthcare technology sector that sold to one of the top 3 US healthcare companies and I'm now on a short sabbatical to look at new opportunities and try new things - such as angel investing.
I remember one of the hardest problems we faced in the early years of my business was not technical related but fund raising as you would expect (obviously harder then due to domcom afershocks etc). So now, 8 years later, other than starting another company (or even joining another startup!), I also want to give back and invest in other startups but as I have only invested in my own I don't believe I yet qualify to be an direct angel investor as other than money I'm not sure what extra value I could bring as I mainly have very specific domain knowledge in UK primary care healthcare sector (I’m have a techie/developer background) and have limited connections outside this field.
In my research I have found places like angellist and startup funds like http://www.kimaventures.com/ but my question is how does one invest into a seed or angel fund as there is little or no information about how to go about it - it seems that either you know someone in this area or your outta luck? There is plenty of info on how to raise funds from angels and angellist describes an angels application requirements (3 previous investments for example) so how to do I get out of this (apparent) chicken and egg problem?
Has anyone on HN got experience in this particularly from the UK/EU that can input - like what angel funds in the EU/US are open to newbie angel investors.
I also think I would rather invest in US based startups unless others can recommend otherwise.
Appreciate any feedback on this topic. Thanks. Way of the future may be sidecar funds that are for passive investors interested in angel investments. The sidecar fund invests automatically in all the deals of the angel group to which it is attached. This is a good way for the angel group to be assured of committed capital - especially during economic downturns where members may be less free with cash - and also allows external investors to achieve a diversified exposure to start up investments with a relatively small capital commitment. This is a good way for newbie angels to learn more about the angel group and their investment process - and if they like they may later choose to join the group and become more active "mentor" investors. Interesting concept and sounds like a good way to start as a newbie angel investor. I'm obviously biased here but I think a great way for you to get your hands dirty would be to invest in an accelerator, such as (plug alert!) Startupbootcamp or The Difference Engine or Tetuan Valley or a number of others. By invest I mean either time (as a mentor) or money (as an investor in the accelerator itself) or both. You get to be involved in 10 early stage startups, but you are not alone. You can follow their progress as they get input from dozens of super star mentors. It's actually an awesome due dilligence process as you get to see which teams are great at generating traction. Have you had a look at these (not that I'm recommending, but might be worth a look)? http://www.angelinvestmentnetwork.co.uk/home
http://www.venturegiant.com/
http://www.angelsden.co.uk/ I believe Business Link also run a similar scheme but I generally stay well clear of them, I've yet to see anyone from Business Link try to do anything other than sell me more Business Link stuff I don't need. Best of luck. Thanks for the links - I came across those during my research and they all seem to links angels to entrepreneurs/companies looking for investment. I am more interesting in seed/startup/angle funds that pick the companies to invest in during the early startup phase. Whereabouts are you? If you're in the south, drop me an email and lets meet up for coffee sometime. I'm not averse to investing in the right opportunity either - might be a good idea to knock our heads together and see what comes out. Funds are always looking for Limited Partners. You may be able to learn this way while also investing... Shoot me an email if you are interested -- I know a few Seed stage funds looking for LP's. Can I ask a question back? You were obviously in a UK startup. Why don't you want to invest in the UK? Not judging here. Just curious as I'm scoping out the startup 'scene' in London. Good question: Yes I was in a UK startup. I feel that the risk adverse nature/attitude we came across significantly impedes innovation in the UK (remember this is in my experience and this was around 2001-2005). I believe we had to work harder to overcome this and this took focus away from our core activities at times. We often found no one was willing to invest unless you had 5 years of track record and £1mill/yr turnover and if you where doing something disruptive (like we were) and innovative in a new market, then it was even harder. So I guess I feel there is more chance that good startup WITH cash will fail due to being crushed by this problem. Plus I think the US is known for its better startup fostering nature and work ethic as suggested in this article. http://eu.techcrunch.com/2009/11/20/european-startups-need-t... Wooly reasons but having said all that, times have changed and I'm not against UK startups at all, I would just like to look at US ones first... I suppose if a UK startup was doing something disruptive in healthcare I might be more interested! So your point is that even if you can get the Angel cash in the UK you'll face larger hurdles in the later stages compared to the US. And I think you have a point about the risk adverse nature of Brits. Thanks for the answer. Wish I had an answer to your question :-) Good summary of my waffle ;) I suppose the stats of startups making it out of the 5th year is appalling. Less than 10% as I recall which may be similar to US but every extra hurdle in the way doesn't help either! Plus US markets are generally larger so ROI is bigger for similar risk profile at a guess. You can try angel networks. Angels join networks that search and filter investment opportunities, and the angels choose to co-invest if there's a match. The largest one in the US is Tech Coast Angels. I work in an angel network, based in Chile, with angels/dealflow from abroad. For example, right now we are closing a round in a medical devices startup in San Francisco, where 4 angels (two in Chile, one in Mountain View and on in Spain) are co-investing using convertible notes. Don't know about US/UK but in Australia the government has set up Early Stage Venture Capital LP structure to encourage investment in innovation. Investments via these structures are income and capital gains tax free. Here is link to news story regarding sidecar fund linked to Sydney Angels http://t.co/RoicITs Maybe find a US angel group investing in primary care solutions, your expertise in the UK market would probably be quite valuable to their portfolio companies looking to expand abroad. Thanks for the link to angellist - something I aspire to join but as I said in my post, you have to be approved to get listed and one of the requirements is you're not a newbie - you must have connections to other angels - in fact you must be referred by another angellist angel and have invested at least 3 times before. This was revealed in this great interview with one of the angel.co founders: http://www.danielodio.com/2010/10/21/fundraising-hacks-inter... I'm in a very similar position - done an exit, taking some time off, have some money to invest. I have yet to find a group that doesn't advertise that they need experience. I would guess that some of them would bend this rule if you got in touch and networked with them and their current members and they decided you were of sufficient quality to be allowed into the club. We should start a 'newbie angels' group where we kick you out after you've done 3 investments! I like it :) drop me a message offline (see my profile) perhaps we can share our research? Hi, please send me an email dawson @ nhs .info