Pioneering Angel LP Investing: Insights, Rationales, and Strategies.
Pioneering Angel LP Investing: Insights, Rationales, and Strategies.
Imagine a secret society of investors, an elite club where the financial wizards gather, pooling their resources and expertise in pursuit of untapped treasures.
In recognition that the next UI Path, Revolut or Spotify can come from any corner of Europe, we have dedicated ourselves to find, access and back the very best allocators in each ecosystem to leverage their eyes and ears when making our direct bets.
Hopefully, by sharing some of our learnings from our first set of investments and building our community of like-minded angels, we can uncover some insights that can inspire you on your path as an investor 🙏
Let’s start defining exactly what an LP syndicate is. Well, loving food as much as the next guy, we often liken it to a clandestine culinary collaboration, where investors join forces to tackle the untamed realm of alternative investments. In fact, it’s much like a culinary dream team, with each investor contributing their hard-earned cash to a pot of gold, to be allocated by a seasoned chef known as the General Partner (GP). This GP is no ordinary cook; they are the orchestrator, the maestro of the kitchen, finding, handpicking, and nurturing the rarest and hardest-to-access resources for the syndicate to feast upon.
Which actually makes me want to not-so-discreetly drop the term coined by my dear co-founder
, Maslow’s Hierarchy of Venture Fund Investing.
Now, this is where it gets interesting. LP syndicates grant us, mere mortals, access to a world once reserved for the financial gods, a world of startups. By combining our modest resources with the deep pockets of fellow LPs, we gain the power to sink our teeth into the juiciest deals, the kind that would make Gordon Ramsay himself weak at the knees.
But tread cautiously, for every culinary delight carries a measure of risk. Just as a chef must carefully select the finest ingredients, we too must exercise prudence in choosing our syndicate partners and investment opportunities.
Due diligence is our kitchen knife, slicing through the fat of uncertainty to reveal the truth beneath.
We must trust in our instincts, our palate refined by experience, as we navigate the choppy waters of LP syndicates. If you’d like to learn a bit more about Angel LP Investing check out the session we did on The Rise of LP Syndicates 🍿👀👇
Picking VC funds to back as an angel
I want to dive into a question I've been asked frequently by angel investors: how do you choose which funds to back and partner with?
Let’s not get side-tracked and delve into why picking matters, but I do want to share a few graphs to visualize why I’ve devoted this amount of real estate in this article to picking funds.
Diversification leads to improved performance
But VC performance varies widely
In fact, a small number of funds generate big VC returns
It’s crystal clear that picking truly matters. Arguably more so in VC than any other asset class. At
our approach to fund selection revolves around our raison d'être, but we like to break it down into a few layers. For us, it's about finding that perfect synergy, that harmony of values and visions.Allow me to walk you through our thought process:
🔍 Strategic Fit
We start by assessing whether the fund aligns with our core principles. Is it primarily a venture capital fund? Does it invest predominantly (70%+) in European startups? And is the fund structured as a GP-LP partnership? These factors play a pivotal role in determining if we're on the same wavelength.
🤝 Partnership Fit
Next, we delve into the partnership potential. We carefully analyze how the fund can contribute to our ecosystem. We seek GPs who not only understand the EUVC model but embrace our grand vision: becoming Europe's leading GP/LP community while deepening the relationships between VC funds, SuperAngels, and Families. We really try to distill the profile of the LP syndicate we would build around this fund. This means we really have to drill down on the strategic intent of this deal for both EUVC and the target fund. It's all about building bridges and fostering a vibrant and collaborative environment.
🌐 Community Fit
We strongly believe in the power of community. As we evaluate funds, we gauge the interest of our community in welcoming this fund to the EUVC family. This includes checking the appetite of our syndicate, investors, but also ensuring that our own portfolio is eager to be affiliated with this new family member. We also look for opportunities to involve them in our content flywheel, creating a dynamic and mutually beneficial ecosystem.
💼 Deal Fit (where our investment goals come into play)
Now, let's get down to business. We conduct thorough due diligence, leaving no stone unturned (well, we try - and we rely on some really important partners to get this right). We meticulously research fund performance, seeking out those with consistent returns, successful exits, and a proven ability to create value. After all, we want to make sure we're investing in ventures that have a track record of generating attractive returns for their investors. It's like seasoning a dish just right - finding that perfect balance.
But here's the thing; while we value experience and a solid track record, we also believe in the power of new beginnings. We have a soft spot for emerging fund managers who might not have an extensive track record yet but possess a burning passion and a vision for the future. Why? Because they allow us to fund emerging technologies and ideas that have the potential to shape a better future for all of us. It's like discovering a hidden gem in the culinary world - a new flavour waiting to be explored.
✨ A couple of things to keep in mind:
Investing in VC funds comes with inherent risks. It's vital to carefully assess and monitor your investments, and stay informed about market trends and developments in the startup ecosystem.
Seek diversification: Spread your investments across multiple VC funds. By allocating your resources to different fund strategies, sectors, and geographies, you can mitigate risks and increase your chances of accessing successful investments.
Seek professional advice: If evaluating VC funds isn't your area of expertise, consider seeking guidance from investment consultants, financial advisors, or experienced LPs. Their insights, analysis of fund performance, and guidance can assist you in selecting the right VC funds for your investment portfolio.
Investing is an adventure - a journey filled with excitement, risks, and rewards. Define your investment goals, explore the possibilities, and embark on this quest with curiosity and a discerning palate.
Leveraging LP investments as an angel
When it comes to picking the right funds, we prioritize partnership and community fit. The stronger the alignment, the more seamless our collaboration becomes. Again, our focus on the mission to build Europe's leading GP/LP community allows us to better extract value from these investments.
We want our GPs to kickass 💥, plain and simple. Of course, it's likely an oversimplification, but that's the core of our vision.
Now, each deal is unique, presenting different opportunities and expectations. But here are some things that we look for:
🎓 Learning
The potential for learning and gathering insights is huge. And it takes many forms.
Reporting (yes, I know a bit boooooring; but hey, it matters so read on)
We always expect excellent reporting from our invested funds. After all, we're entrusting our money and our investors' money to a team that is going to invest it into a blind pool of assets. Transparency and communication are paramount.
Deep Dives
Some funds are truly committed to adding value to their LPs (beyond those sweet 💶of course) and produce deep dives where they briefly highlight the most exciting technologies, sectors and trends to watch for. Aside from shedding some light on exciting emerging technologies, GPs can share their focus: what is each technology about, why are they excited about it, and what investors should be aware of when reviewing startups in these spaces.
AGMs (and any type of GP/LP meeting or meetup for that matter)
Typically, the GPs take center stage and spill the beans on the fund's performance, their masterful portfolio, and give you a glimpse into the future outlook. You may also get an exclusive peek into the GPs’ plans for future funds and juicy co-investment opportunities. And let's not forget the pièce de résistance – the chance to hear from the whole team, especially those unsung heroes you rarely interact with, wether that’s VC staff or even the often unsung heroes - the founders of the startups themselves. The cherry on top? You're likely to get the chance to meet other LPs, like-minded individuals, and to cook up potential investment opportunities together. You can also read a bunch more about this 👇.
👥 Community building and positioning
Oftentimes, our collaboration extends way beyond just the traditional reporting. It involves joint community building and positioning. We believe in the power of uniting forces and creating a strong network of VCs, SuperAngels, and Families. Through these partnerships, we aim to deepen relationships and foster a vibrant ecosystem.
💶 Co-investing
Co-investments play a significant role in our approach. We're continually learning and embracing this practice more and more. Co-investing allows us to strengthen the bond between VCs and SuperAngels & Families, harnessing the collective power of expertise and resources. It's a dynamic process that enhances our ability to support innovative ventures.
Adding value as an Angel LP
Again, this is an essential perspective shift, that we are really doubling down on. It’s only natural if put into perspective with our mission to build Europe's leading GP/LP community. It’s a perspective shift that really allows us to deepen the relationships between VC funds, Angels, and Families.
We focus on three key areas of support for our GPs:
📣 Marketing, Brand Building & Positioning
As Europe's leading GP/LP community and platform, we actively contribute to the marketing and brand-building efforts of our GPs. By showcasing their expertise and achievements, we strengthen their market position and visibility.
🤝 Coalition Building
We prioritize deepening relationships with Angels and Families, fostering collaboration and synergies. While fundraising is an integral part of this process, we provide more than just financial support. It's about building strong partnerships and aligning our goals for long-term success.
💡 Best practices and benchmarks
One important aspect we're constantly learning and improving upon is best practices and benchmarks. We're exposed to a variety of LP reports, each with different levels of sophistication. As we gain more experience, we develop stronger opinions on best practices. However, it's essential to note that we can't enforce specific reporting methods on GPs. It's up to them to be open to our input and implement changes if they see fit.
On the flip side, it's equally important for us to consider what value our VCs extract from us, the LPs.
✨ Let's take reporting again as an example (bear with me here -> I do know it's not the sexiest of topics)
While quarterly reports are a common practice, true value is derived from consistent communication, alignment, and transparency. We notice many VCs emphasizing the importance of investor reports from portfolio founders not all apply that same level of consistency and discipline in their own LP updates. We encounter funds that only reach out when prompted or at the quarterly report due date. While it's acceptable, it creates a different and less synergistic type of relationship, which contrasts with our goal at EUVC - to foster strong connections.
I strongly encourage GPs to think strategically about their LP updates. It goes beyond listing new investments, portfolio updates, and fund performance. Consider educating and informing the LP base, sharing insights and analysis on industry trends and developments. Most importantly, be disciplined and authentic in your interactions with LPs.
If you enjoyed this read and want to join us in connecting the best in Europe, don’t hesitate to reach out to join us in our Angel LP community.
We're all about fostering a culture of open communication, shared knowledge and mutual value creation with our syndicates.
We strongly believe that we can forge stronger partnerships and contribute to the growth and success of the European tech ecosystem.
And we’d love to invite you to venture with us.
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