Lately, there has been an influx of investors moving from the usual traditional group that is “Angel Group” to online platforms. Such movements were seen from American Angel group, Northcoast Angel Fund to SeedInvest. Then it occurred to me, will online angel platforms such as SeedInvest will replace these angel groups?
One matter that had been point out is that unlike the revolution of that occur with kodak being driven into its downfall by digital media, the idea of online platforms will not ultimately replace them but it does take a sizable of their numbers away. In my opinion, Angel groups are comprised of experienced active investors writing off big cheques while the online platforms offers to the less experienced and active ones that are investing in a more minute amount.
Here are three reasons why:
Successful investing through an angel group takes a lot of time.
Investing successfully takes and active involvement in screening through multiple deals and business plans, conducting due diligence and monitoring each investments. In the current age, most people do not have the luxury of time. Even the experienced and most successful investors are moving their investment portfolios to online platforms simple because they do not have the hours enough to screen and conduct due diligence to each and every proposals from entrepreneurs and take not just their time but also money to be active in just one group.
Few angel groups have enough successful angels to follow.
If you are an investors and you are depending on someone to make those screenings, conduct due diligence and to monitor your investments then you need to follow someone who really knows what they are doing. Many credible investor groups that have credible investors with successful deal makings and exits serves no problems. But as of late, many groups with less active members are following angel group managers that do not have any successful track records in their portfolio. Therefore, those less active ones are more likely to shift to online platforms as they are backed by credible players in the market.
Once-in-a-lifetime deals aren’t available to members of most angel groups.
A problem that was found was that angel groups do not see the many great startup investment opportunities because these new companies are not strategically found in places where startups are usually located like in big cities such as New York or London. For new startup companies that are inside the online platforms has the probability of them being found is higher than through a local angel group.
For active angels that have a considerable amount of time on their hand and has greater entrepreneurial experiences they tend to stay with an angel group. This is because by being in a group, they are able to make better informed decisions about the investments they are making as compared to using these platforms because, they are able to meet the founders and conduct due diligence with them and be able to negotiate better. But for the less passive and inexperienced angels that can only contribute to a smaller scale, moving to these platforms makes sense. Since they are a small part of the investments they are making and cant make themselves into a board member, the platforms can make a better use of their time, access to more deals and they can follow the experts along the way.
In my opinion, these angel platforms will not be replacing angel groups as of now. But, many angels that lacks the experience, time and capital are already moving to online platforms. In the past many angels make a majority of those groups, but slowly the movement to the online platforms shifts investors to a more streamlined hub that will change how angel investment work in the future.
BizAngel.co is a Business Angel Network accredited by the Malaysian Business Angel Network (MBAN) the official trade association and governing body for angel investors and angel clubs in Malaysia. We strive to bring entrepreneurs and investors in Asia to fuel the startup ecosystem.
Like our facebook fanpage for updates