October 21, 2021

Investment theses aren’t just for VCs. Angels need them too

Having a focus can help you stay efficient and become a better angel investor

Sarah Drinkwater has been an Atomico scout

In the last couple of years, aided by a place in VC Atomico’s angel programme, I’ve fallen in love with angel investing: making small bets on early-stage founders. And over time, I’ve realised how few angels have distinctive investing theses. 

An investing thesis is really a fancy way of saying a mission statement that articulates a point of view and strategy. And mine is that, with few exceptions, I tend to focus on community-directed products. Think contraceptive review platform The Lowdown, audio advice network Anyone or The Stack World, a destination for entrepreneurial women. Whether femtech or economy, these are companies where community is their competitive moat. 

But why would an angel need a thesis? Surely you just meet founders and offer them some cash? Well, yes. But the market’s noisier than ever; capital is becoming cheap. We’re seeing more funds move into pre-seed plus an increasing number of super-angels and having a thesis, even a simple one, helps founders know what you look at. If you’re angel investing alongside a day job, which most of us are, a thesis helps you stay efficient. And lastly, this can lead, I believe, to true mastery; whether in terms of the network you’re building, the trends you follow or the advice you give. 

Angel investing is risky, so it’s smart to start small

Look at funds. You’d never see Felix, known for their angle of “technology/creativity”, or Connect, with their love of opinionated products, do a quantum computing deal.

How to build a thesis

A good investment thesis sits at the intersection of experience, passion and opportunity. 

To build one, first start with you. What’s your professional experience? Who have you worked for or with? What are the networks you have access to? Consider the amount of capital you want to commit and your risk appetite; angel investing is risky, so it’s smart to start small. 

Next, what fields are you most excited about? One way to develop your knowledge here is to see a lot of startups pitch, whether through going to demo days or joining communities like Alma Angels where a lot of dealflow is shared. I’ve seen a legal friend fall passionately in love with healthtech after a family member’s personal experience, and work to understand the blockers and opportunities to ensure she was a great value-add investor to companies in this space. 

Lastly, think about opportunity. With the experience and passion you have, what trends or white spaces do you see that feel overlooked by others? 

The most effective way to get your point of view out there is to repeat it a hundred times

In my case, I’ve spent years building community teams and community strategies in tech companies big and small and, however much “community” is an overused word on tech Twitter this year, there are still very few angels with long-term expertise, and even in the US only a few who specialise in this space. 

Once you have a rough idea, start mapping it out on paper. Then start testing. The most effective way to get your point of view out there is to repeat it a hundred times — tell founders when you meet them, join relevant events, write Twitter threads (or Sifted articles). For inspiration, there are already a few European angels who have shared their theses: my fellow Atomico angel Sameer Singh is all about network effect, while Sophia Bendz has a love of femtech. 

And each company you decide to fund or seriously look at will confirm or shift your thinking. 

Congratulations, you’ve got an angel investing thesis!