Angel investor applies in a group to dilute risks – 05/29/2023 – Mpme

Angel investors gather in groups in search of reducing risks, increasing the flow of money and knowledge in the startup market. Therefore, in addition to financial support, these associations act as advisors to entrepreneurs and provide constant exchange of information.

This type of investment —which necessarily comes from individuals— is one of the main sources of capital for these companies.

“Angel investment is usually done when the business is still in its infancy, which is why it is very important for the entrepreneur to use the knowledge brought by those who invest to their advantage”, says Gilberto Sarfati, professor at the entrepreneurship center at FGV (Fundação Getulio Vargas).

The 24 largest investor networks in Brazil carry out an annual survey to assess market behavior in the country. The most recent shows that, in 2022, these groups invested BRL 68 million in 128 startups.

The survey also shows that, among the members of these networks, 96% say they prefer to invest in companies in the traction stage; that is, beginners, but already in full operation.

According to Cassio Spina, 55, founder and president of Anjos do Brasil, at this stage it is easier to identify the defects and qualities of the business, in addition to checking the profile of the entrepreneur himself. “The angel investor is the one who gives the second check. The first usually comes from the entrepreneur himself and is what makes the business come into existence”, he says.

“O [aporte] of the angel investor is what really helps it grow, and it is only possible to assess whether the company achieves this growth after a certain time”, he adds.

The executive also claims that the advantage of investing in a group is both for the entrepreneur and the investor. “When you invest with more people, the natural risk of investing money in a start-up company is diluted. For the entrepreneur, a greater number of investors generates a greater contribution.”

To submit a business to the evaluation of Anjos do Brasil, it is possible to register through the network’s website, which will carry out an analysis of the company. Members hold monthly virtual meetings with entrepreneurs, who seek to sell their ideas.

In general, the largest networks of angel investors in Brazil are formed by former students of renowned universities. One of these is Insper Angels.

“Our connection with Insper is not institutional, but umbilical. The members met there and that’s where we learned a lot of what we know about economics. Joining allows us to pass this on”, says Vitor Kawamura, 32, president of Insper network.

Camila Farani, 42, one of the references of angel investment in Brazil, says that the biggest attraction of the business is the possibility of sharing and getting to know new markets and new people.

“I’ve been investing in startups for 13 years and being able to dream together with the entrepreneur and help him achieve that is something that allows me to get to know people and markets”, says the businesswoman, who is the founder of Gávea Angels, a pioneering network in Rio de Janeiro , and former judge of the Shark Tank Brasil program.

Farani claims that the sum of some factors is what makes her decide to invest or not. According to her, the entrepreneur’s profile is as important as financial health when evaluating a startup.

“I have a thesis that I call the three Ts, which are team, tech and trench [equipe, tecnologia e trincheira]. To invest in a company, I need to see in it dedicated people who know what they are doing, an innovative idea, with technology to grow, and a defense strategy in case of any problem.”

With the bankruptcy of Silicon Valley Bank, in early 2023, the startup market suffered a shock, with a decrease in applications in several companies. Farani, however, doesn’t think angel investing is going through a doldrums.

“The current scenario is difficult for any type of investment. We are in the middle of a war, in Brazil we have just changed governments, all of this affects the circulation of money. But I think we are more down to earth, seeking with more criteria where to invest.”

Cassio Spina, from Anjos do Brasil, thinks the same. For him, there was a period of insecurity in the market, but today what is seen is more selectivity.

“During the pandemic, a kind of startup bubble was created, as if every company was going to grow exponentially. I think this crisis generated a fear that ended up being beneficial for the market, because it increased the return, which is the main objective of any investment.”