London’s Major, Boris Johnson has just added his weight to London’s new accelerator academy too

“The Accelerator Academy represents exactly the type of investment in London’s future businesses that will secure our position as Europe’s digital capital.

Using the nous of seasoned entrepreneurs to mentor those in the very early stages, alongside much needed access to investment, the Academy will give tech entrepreneurs a real leg up in a tough economic climate, helping to create London’s future jobs.”

Well said Boris.

Business angels and business angel networks are changing … and it is for the benefit of both the angel investors and the entrepreneurs!

Further evidence this week is that business angels that truely enjoy mentoring their companies are getting involved in business accelerators at NW England’s super business angel David Atherton has committed his time to Manchester’s new business accelerator – run by Idea Alive .

At the same time, this month saw Ian Merricks of White Horse Capital commit his time and business to launching and education, funding and development programme – the accelerator academy. Again, the list of mentors for this programme reads like a who’s who of London based business angels with Michael Blakey and Maria Dramalioti-Taylor leading the business angel roster.

Regardless of the business angel, Atherton in Manchester or Blakey and Dramalioti-Taylor in London, they all share a history of starting, leading and mentoring companies.

These business angels are not bankers or financiers by trade – they have built companies and want to help others (with their money) do the same again, and again, and again.

Hence, the mentoring business angels – that is, those that enjoy being involved in their startups, are focusing on the accelerators for two key reasons.

Firstly, they recognise that starting up businesses is a skill that can be developed through practical education (ie doing it – in a supportive and reflective environment) and second, the success rates rise exponentially when investors and angels take this more enlightened route.

Of course, success breds success, so expect more business angels to make more money by working with their local or regional programmes, whilst the traditional business angel networks shrink and focus on less knowledge and more asset based investments such as clean tech or, in the UK, wind farms.

As predicted here on i Business Angel, the number of new business accelerators is exploding, whilst also offering different flavours.

This month we’ve had news of a new accelerator in Moscow, Russia called TexDrive using the platform of the TechStars network along with Jon Bradford’s Springboard Cambridge and London based accelerator.

Also launching this month in London is Accelerator Accademy which combines an educational / training format with venture capital cash available at the end.

Similary, in Manchester, the idea based accelerator Idea Alive is beta launching. Idea Alive differs from current accelerator formats in that it will work with inventors and solo entrepreneurs whose first task is to build a team, whereas typically accelerators will turn down application from solo entrepreneurs.

Along a similar vein, Cambridge Business Angel Sherry Coutu has been driving the Silicon Valley Comes to the UK appathaon event in which developers will create a series of apps, in different UK cities during October, before choosing the best apps and the developers winning a trip to Silicon Valley.

Lastly, IBMs smartcamp – in November, is closing its doors to applications on Friday the 14th Oct.

Seems like business angels and entrepreneurs have an increasingly broad choice of camps, weekends, part-time and accelerators to join and support.

So, despite the economic gloom, tech looks ready to boom?

If you know of more relevant events or accelerators launching, please let us know or add a comment below…

1. Luke Johnson explains why Business Angels are the place to start for startup entrepreneurs

http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8728211/Luke-Johnson-Where-to-look-for-your-first-start-up-loan.html … and not the traditional banks nor VC community (with a few exceptions such as the NW Fund in NW England).

2. Health? Do you let your startup or business lifestyle take over your health?

Here’s why/ how VCs, entreprepreneurs and business angels are investing in their health as investing for wealth.

http://www.theequitykicker.com/2011/08/16/health-and-fitness-my-personal-journey/

… there is no surprise that people who make long term investments are also prepared to invest in their health and fitness.

3. One thing every startup teams needs to succeed.
http://www.enterprisefreelancefair.co.uk/start-up-the-one-thing-that-you-absolutely-need-to-succeed/

… without this, your startup business or fledgling investment will struggle.

It is backed by private venture capital and not public funds.

Due Diligence is often seen as not possible or relevant for an early-stage investment. Yet most business angels lose money on the majority of their investments

So, can due diligence help?

Many business angels comment that “they are taking a punt”, comforted that they are only risking a small proportion of their own capital, and encouraged by the tax credits they will receive, so do they have to do due diligence?

Equally, many business angels have also enjoyed significant success and trust their own gut feel as the barometer of an investment. Yet Nesta tells us (in their 2009 report on business angels) that “even a small amount of due diligence significantly reduces failure”.

Okay, it is true that Angel Investors are often investing money they can afford to lose – but will still experience any combination of anger, disappointment and remorse when that loss is incurred. Is that worth it? 

And there are plenty of examples of Angel Investors following their “gut feel” without exploring and rationalising the causes of these feelings – something that can be an illuminating process for both the angel and the potential investee business.

Whilst Angel Investment will always be a high risk activity, there are due diligence steps that can be taken to significantly increase the chances of success.

How to increase chance of success for early-stage investments

Due Diligence can (and should) be performed on an early-stage investment, focussing on the following areas:

1. The Market Opportunity:
   Market size, product position and pricing
   What is the value to the customer?

 

2. The Management Team:
   What are their competencies?
   What are their strengths?
   What are their personal expectations?
   Where are the gaps – and how easily can these be filled?

 

3. What is the structure for delivering the Business Plan?
   Are the best sales channels being used?
   What are the key risks in the supply chain?

 

4. What are the expectations of investors?
   How may value be realised for investors?

 

Working through these four questions provides structure, balance and focus to the investment process.

It also provides a much greater likelihood that the expectations of the Management Team and the investors are realistic – and aligned.  This means that the relationship between the investors and the executive team are much more likely to be friendly and to work in a cooperative and successful manner.

In my experience, the above process works best if it is seen as a collaborative, rather than confrontational, exercise.

So, bite the bullet, do the due diligence. you know it makes sense.

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Chilcomb helps investors and early-stage businesses through this due diligence process. Chilcomb’s Investor Checklist provides a robust structure to increase the chances of a successful investment.  To find out more, go to our website (www.chilcomb.com) or contact Matthew Dreaper.
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