There is a new super-business angel on the block.
He is called Adam Norris and is based in the UK and is looking to invest £100m into his business angel projects via his investment firm Horatio Investments along side co-founder Martin Bowles.
Adam shared some of his time (track side – he was with his kids racing carts in Italy when we spoke) and lots of the ideas and experienced he has gained.
Read on to find out how Adam and his team check out potential investments and entrepreneurs…
How much are you looking to invest?
I’ve put aside £100m of own money towards angel investing and have built a team of 12 people to help me find and manage those investments.
Are you an entrepreneur or VC by background?
I’m an entrepreneur. I came from the pensions industry which I saw as fragmented with lots of sales men running around
Hargreaves Landsdown – pensions by post – merged – floated – FTSE 100 company
I left 4 years ago but retained a holding.
How are you going about Business Angel investing?
Its fascinating – the first task is to learn how to invest.
We are looking to do things a bit differently and work with those who can add value – who can be co-investing angels, bring sector skills or working along side angels
Investments so far?
Its early days for us. I’ve invested £2m per year – for three years. The smallest investment was pre-revenue; £25k. We went ahead because the cash burn is very low and it represents reasonable value.
The largest was a £1m investment for company that has track record and was looking for capital to enable it to grow.
What have you learnt about Angel Investing?
Its all about the people!
Well, okay, we look at the business too of course because you can get great entrepreneurs running the wrong kind of company.
However, my view is that well over 50% is down to the person.
Do you trust business plans?
Not really. You can’t write the business plan for the future – for instance, how would you write Apple’s plan before the internet?
Therefore, it has to be about the person – and their ability to morph the business and move on.
How do you assess opportunities?
We use a combination of gut, consumer testing the product, patent check/ TM
We spend over 100 hours on due diligence and look at the background of the entrepreneurs, what have they done what did they learn? Is there a common theme of getting it wrong?
Also, we look at the entrepreneur’s values, what’s important to them, what kind of hours do they work, what are their expectations?
Also how strong is their domain knowledge?
Do you think the entrepreneur’s parents matter too?
Yes, we look at what their parents have run. It is a good sign if their parents were self employed or commission based income. Only 2 well known UK entrepreneurs eg.. James Dyson (parents were teachers) and the founder of Red Bull come from non-entrepreneurial parental backgrounds.
Most people learn from their parents.
You also look for dyslexics?
Yes, dyslexics as they tend to be good visionaries and better at forming a picture of the future from a few facts.
For instance, Carlos Slim and Bill Gates were dyslexics. In fact, a third of top entrepreneurs are dyslexics compared to less than one in ten of the general population.
Do you assess entrepreneurs?
Yes, we use psychological tests and have hired the guy who wrote thesis on entrepreneurial mind.
Most angels have been there and done it and know how to pick people like themselves but they don’t know how to pick others – and that’s something I wanted to solve.
To do that I took months out studying the best athletes and entrepreneurs.
What about the risk of false positives?
When looking for the right entrepreneur it is easy to get trapped by the false positives. For instance, enterprenuers who start a business with swanky business plans and large corporations experience is a much bigger risk than is typically assumed.
I’ve found that tenacity and cheekiness can be key to make deals happen in a young company.
The hard ones to spot are the brilliant ones. For instance, an athlete who trains for 1 hour per day and can compete or beat US athletes who are full time from 15 years old – those one hour a day guys are the special ones.
How should entrepreneurs approach you?
We ask entrepreneurs to fill in our forms, we don’t ask for business plans.
What we believe and want to know about the entrepreneur and the business is different from other angel networks – so we ask them to fill out our forms and go through our process. To apply for investment please visit http://www.horatioinvestments.com/ApplyforInvestment.aspx.