This week’s Angel Insights episode features Keith Wallace, Co-Founder of DeInvesteerdersClub – ‘Holland’s most informal investors’ club’. Prior to joining one of the Netherlands’ largest networks of informal investors and co-founding DeInvesteerdersClub, Keith started a consulting company that was rather successful until it burst alongside the ‘internet bubble’. In his interview with Harry Stebbings, Keith talks about his experience as an entrepreneur and investor, the ethos behind his approach to conducting valuations, why investing through a club or syndicate is a good idea, the European tech market, and whether companies in the US are likely to do better than those in Europe.
The benefits of investing as a syndicate
As the Managing Partner of the Dutch DeInvesteerdersClub, Keith has witnessed first-hand, time and time again, what benefits can be wrought in bringing fledgling investors under the wing of experienced business angels. Here are a few pieces of his advice for those of you looking to invest for the first time.
Join a team
If you’re just starting out, having someone to help guide your decision making and due diligence is invaluable. Whether you ultimately choose to invest by yourself or as part of a group, joining a society of experienced investors will give you access to the experience of its members, good and bad.
‘I should invest in something if I’m calling myself an informal investor’
Ok, so you’ve joined an investment network and done some research. What next?
It’s only natural that the second you update your LinkedIn profile with the title ‘Investor’ your fingers will itch to throw money at the next fresh-faced but well-meaning startup that looks your way. But just as artists don’t spend every hour of the day painting, carpenters carpenting or aeronauts floating in a tin can far above the world, neither should you feel obligated to rush into an investment at every opportunity simply to defend your title. Relax; think. There’s plenty of time to do your research and make an informed decision on whom to back.
Consider investing alongside experienced players
For those new to the game, investing alongside seasoned angels can be a great way to learn and carry out due diligence. This is something that groups such as Keith’s DeInvesteerdersClub help stimulate.
‘If we bring [informal investors] together and give them a mentor relationship with one of the more experienced investors, a lot of the haste to invest is taken away and they tend to make much better decisions,’ says Keith. ‘So we find that syndication can be exceptionally useful.’
Tall tales and optimistic investing
Another thing that’s rife among new investors is idealism.
‘I don’t like great storytelling,’ says Keith. ‘If I’m going to be told a story, the story should be factual, and include the achievements that have been made to date and how I can help make more achievements in the future. That’s where value comes from.’
Sitting over dinner and listening to someone wax poetic about their entrepreneurial vision can fill anyone with unabashed enthusiasm, but that sort of blind fervour smacks of naïveté, Keith argues. Once you speak with a few entrepreneurs you’ll find that enthusiasm is generally a given – and what you should really look for is the potential to grow a business, and grow it fast.
Make sure you know the figures
A story is great unless that’s all it is. Taken at face value, a tale of innovation and disruption is massively appealing, but what is the meat of the matter? Can the entrepreneur prove that their product is wanted? Do they have numbers to show that there is interest in a certain quantity of their product being sold over a specified period of time?
Time spent, effort exerted and intentions made are all well and good – so long as at the end of the day there’s something to show for it.
Learn from experience
And not only your own. Speak with every investor you can get hold of – ask what experienced investors have done well or done poorly, find out what fatal pits novice investors have fallen into and what successes they’ve found. Read; listen to podcasts. Stay on your toes and keep alert.
And, more than anything, never stop learning.