Delio roundtable: The importance of forming partnerships for angel investor networks
The Delio team brought together a pan-European audience of angel investor networks to share their views on the latest topics impacting on the world of start-up investing, private markets and business in general. One of the main topics of discussion centred around partnerships and how angel networks were adapting their strategic approach to working collaboratively as a sense of post-pandemic normality begins to emerge.
There was little doubt from the group that nearly all angel investor networks had been forced to alter their strategic approach over the last 18-24 months, with many believing that this new way of working was here to stay.
What role do partnerships play for angel networks and are they important?
There was universal agreement that strategic collaboration was vital for angel networks, whether that be in the form of formal partnerships, networks of contacts, or simply like-minded organisations that could refer investors and opportunities. While partnerships have always carried benefits for angel networks, their importance had been magnified since the Covid pandemic given the restrictions that had been placed on more traditional activities, such as in-person pitches or investor networking events.
While partnerships are considered an important component of an angel network’s armoury, it was interesting to note the diverse ways in which organisations were working with their partners. This can mean collaborating with traditional financial institutions such as venture capital firms and family offices, but also ‘professional partners’ like solicitors, accountants and business support services, as well as local government and professional bodies.
It became apparent that while each route had its own pros and cons, most networks had found their own unique set of partners that helped them to meet their wider objectives. As one of our attendees commented, “the biggest challenge facing angel networks at the moment is getting access to investor money, so partnerships are vital.” Another member of the group agreed, arguing that “a siloed approach is difficult to sustain… none of us can stand alone in the current market.”
What value do these partnerships add to angel networks?
With a diverse range of organisations’ opinions reflected in the session, it was perhaps unsurprising that partnerships were seen to offer different benefits for different parties. For one of our guests, the main benefit of working with professional partners was simply to help them generate referrals; both in terms of interesting investment opportunities and potential investors who may want to join their network. While it was acknowledged that not every referral would be the right fit – “some will be good, some will be bad” – it was broadly agreed that the value of good quality introductions outweighed the poor ones.
One of the angel networks involved in the session is based in Austria and operates across several European countries. Their representative argued that establishing and maintaining partner relationships in specific territories was vital for ongoing growth; “The European angel investing scene is less mature than in the UK, so we are much more reliant on sourcing investment opportunities from other countries. For us, it is very important to work with trusted local partners to help us overcome the regulatory and language barriers that come with operating across borders.”
There was also broad consensus that some of the most meaningful partnerships that have emerged were between angel networks themselves. Two of the attendees explained how they had met through previous Delio-hosted events and identified that some investment opportunities that were not suitable for their investors may be of interest to other groups. This had resulted in them regularly meeting to share opportunities in a more structured way. Another angel network reiterated this sentiment, adding “In 95% of cases our angels will not be able to fill a funding round, so working with other networks is essential for them to fully support opportunities.”
Local and national Government support for start-ups is a ‘mixed bag’
State support for start-up businesses has been a hot topic over the last 18 months. Our attendees discussed their own experiences of working with Government sponsored initiatives that are designed to stimulate investment in early-stage businesses; it’s fair to say that opinions from across the group were somewhat mixed to say the least.
Several UK-based networks said that they are involved in ongoing conversations with the British Business Bank about the support available to the start-up ecosystem. There appears to be a mixed reaction to the role played by the bank, which is Government owned but run independently; it was set up to work with VC firms, leasing companies and other financial institutions to offer easier access to funding for small businesses.
One of the participants explained that they had experienced ‘some tension’ in their dealings with the bank, while another said that they had been lobbying them for several months but that the bar for securing funding ‘was consistently being raised’. However, another member of the group said that the British Business Bank had actually been proactive in referring investment opportunities and that they enjoyed a relatively productive relationship with them.
One of the European-based angel networks said that the picture on the continent was very different to that in the UK, with very little in the way of public funding and fewer tax incentives available. His view was that while state support in the UK may not be perfect, the fact that there was some was at least one positive!
How will partnerships evolve?
There was a consensus amongst the group that the role of partnerships will only grow in importance over the coming years. Several members of the group highlighted how collaborating with media partners was likely to be a key focus over the next 12 months as they looked to actively promote themselves more, targeting both investors and businesses looking to raise funding.
Additionally, technology is seen as a key driver of strategic collaboration, with the ability to share the network’s investment opportunities online and grow their digital network of investors, which is core to their growth plans. This view perhaps best reflects the new and innovative ways that angel networks are working collaboratively to extend their reach; while traditional partnership models still remain important, new and innovative ways of working will be key to their ongoing growth.
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