In a career spanning more than 40 years Peter Cowley has founded and run ten SMEs in the fields of technology and construction. And he has used that vast experience and knowledge to invest in over 60 start-ups, since becoming a business angel a decade ago.

“Business angels are investors in start-ups, which by their very nature are high risk,” he says. “I invest in early stage firms in the deep-tech sector. That is my business background and where I have the most understanding and can be of most use and assistance to a new venture. Other angels tend to be similar in investing in sectors they know well.”

Business plans

Cowley says he receives 1,400 business plans a year from start-ups, some of which contact his website and others he finds through networks.

“Of those, I tend to invest in eight to ten a year after a process of face-to-face pitches, seeing a detailed 15-page pitch deck and a good spreadsheet model for the first 18 to 24 months,” he explains. “I prefer to see a business that is already generating some revenue, with existing customers and with a future strategy, but I also invest in businesses where there is much development to be done before sales. I want to know that they can do what they say they are going to do.

“Primarily it is all about people, people, people. An experienced team of two or three is preferable to single founders but I need them to be able to listen, be trustworthy and capable of coping with anything that is thrown at them. Of course, they also need an idea that is disruptive or solves an existing problem in a different way. The idea must be scalable and also defensible through IP and sometimes patents.”

Smart money

Cowley says it takes him around five months to make an investment after getting to know the team and business and doing due diligence. “I will even mentor and help them during this period in areas such as marketing and finding customers. If they don’t want my help then I won’t invest,” he says.

“Angels who have already been on an entrepreneurial journey, so called smart money, are more useful to an entrepreneur as they can reduce the number of mistakes they will make if they are young and haven’t been an entrepreneur before. Most angels don’t do this.”

He believes the chances of failure can be lowered if the founders take an angel's advice. “Angels are put off by entrepreneurs that won’t listen, not just before investment but afterwards,” he says. “So, if the market changes and opportunities arise that may need the business to pivot then they must react.”

Exiting

Cowley takes an equity stake in a business – ordinary shares with the same structure as the founder – and expects to hold it for between eight and 12 years. “This is not a liquid market and it can take many years for a business to get to an exit such as trade sale or IPO. You aim to get a return which is ten times your original investment,” he says.

“However, many ventures will fail, and you have to accept that you could lose it all. It is not like losing money on a football game or a lottery ticket, when you know instantly that your money has gone. Angel investing takes very much longer and both sides have to be very patient.”