Robin Leigh, a seasoned private angel investor, has a wealth of experience in the UK and Asian markets. In this first installment of our two-part interview, Robin shares his journey from a career in corporate finance to supporting early-stage businesses. He emphasizes the role of trust and transparency in relationships between investors and founders and discusses his criteria for backing startups, highlighting the importance of "under-promising" and "over-delivering."
Why Choose Angel Investing?
With a background as a City lawyer, corporate finance adviser, and McKinsey consultant, I realized I had an array of skills that are invaluable to small businesses—skills they usually can’t afford. This realization led me to not only invest but also engage deeply in building businesses by using my expertise.
Rather than focusing on specific sectors or opportunities, I emphasize the broader picture. Given the current volatile macroeconomic conditions, including geopolitical tensions and fluctuating interest rates, predicting the future is tough. As such, I prefer to support entrepreneurs who can identify opportunities that are either unserved or inadequately addressed. I start with the business opportunity itself, dedicating time to understand the relevant sector, rather than first targeting sectors and then seeking opportunities within them—a common strategy among angel investors.
Building Strong Investor-Founder Relationships
When it comes to forming robust relationships between investors and founders, it boils down to trust, with transparency being the bedrock. I work alongside investors and partners in various projects, ensuring open, prompt communication. Surprises are rarely welcomed, especially if they’re unresolvable when discovered too late.
My strategy allows recipients to choose whether to delve into the information I provide. If they forego it, that’s their choice, but no one should miss out on information I hadn’t communicated. As far as communication is concerned, I value ‘under-promising and over-delivering’ alongside ‘more rather than less’. While a lengthy email discussing a problem looking for input might not be ideal, it’s preferable to learning of an issue after it becomes irreparable—especially when advice from an experienced angel investor might have salvaged the situation.
Misconceptions in Fundraising
Founders often get so close to their ideas that they struggle to see why outsiders don’t immediately share their enthusiasm, and sometimes, they even take offense at probing questions meant to test the idea’s strength or to clarify its appeal.
For investors like me, passion is necessary but not enough. I want to see solid financial projections grounded on reasonable and defensible assumptions, illustrating the business’s viability and potential. Knowing the exit strategy and understanding the protections I have as a minority investor are crucial elements in the process that every angel investor should consider.
Some founders are unfamiliar with the intricacies of the fundraising process, its duration, and the need for detailed formal documents. These documents minimize future disagreements by ensuring all parties have a shared understanding of the deal terms, rights, obligations, and expectations.
What Drives Investment Decisions Today?
I rely on a handful of preferences—some personal—that stem from my experience where many investments didn’t pan out. These ventures can eat up a lot of time and investment before fizzling out. To mitigate such risks, I focus on factors that can help preserve both time and funds, even if it means skipping potential game-changers like ‘the next Facebook’. These include:
- Favoring business-to-business over consumer-facing ventures due to the high cost and uncertainty of direct consumer acquisition in crowded markets.
- Seeking a sustainable competitive advantage that makes it difficult for competitors to encroach once the concept is validated. Ideally, this comes from hard-to-replicate relationships and know-how, rather than unreliable legal defenses.
- Looking for tangible assets on the balance sheet that provide collateral for borrowing without dilution and offer some residual value if the business fails.
- Backing founders unafraid of admitting “I don’t know” or asking for help while viewing problems as challenges rather than crises. Building trust, demonstrating high integrity, and inspiring a team are non-negotiables in the angel-investor partnership.
- Assessing reasonable market potential to ensure scalability to a level conducive to a successful exit, ideally without dependence on new geographical markets.
Over the years, my preferences have remained largely unchanged, having been established during my time investing at UBS.
Facing Unexpected Challenges
Frankly, there’s no single challenge that stands out. However, a more general takeaway is my tendency to structure investments in tranches, committing more funds as milestones based on the founder’s plan are achieved. This aligns interests between founders and angel investors and keeps everyone focused on advancing the business while ensuring regular discussions if milestones aren’t met.
In our next session, Robin will divulge strategies for navigating changing markets and explain how experienced investors can become valuable ‘thought partners’ for startups.
If you’re an angel investor in search of promising opportunities, join us at the Angel Investment Network, where global investors connect with tomorrow’s standout businesses.
