Southeast Asia has become one of the fastest-growing markets for startups over the last decade. With millions of young and tech-savvy talents and a business landscape that’s welcoming to a new breed of entrepreneurs, the startup ecosystem continues to expand at striking rates.
This has also paved the way for the emergence of angel investment networks, which are seen to have been gaining momentum in recent years. Investing in early-stage private equity has been happening in Southeast Asia, where opportunities seem endless. These angel investors invest their own money into enterprises they feel strongly connected with, aiming to guide them as they scale up the business.
AngelCentral, a popular network of angel investors in Singapore, revealed that angel investors in the region do not practice strict valuation guidelines or rules in their investments. About 60-70% of angel investors surveyed by AngelCentral said they are more particular about the founder/founding team, business opportunities, and the vision of the business.
The top reason angels give for investing is that they get to learn from and interact with founders. Financial returns are a close second. This is consistent with the findings that an overwhelming majority of angels are not passive shareholders but actively help founders by opening doors and advice.
“As an active Angel, one of our strongest value add is that we have scaled and sold a tech business before. So we relate well to the emotional journey of founders and share our experience with them, said Huang Shao-Ning, Chief Angel at AngelCentral.
Here are some of the most significant findings from the survey.
The angel investing network is overwhelmingly male-dominated.
Active angel investors in Southeast Asia are typically male (84.1%, which means there is one woman investor for every eight men), around 31 to 50 years old, and holding senior positions. Most of these investors source startup deals through their networks; 32% said they actively go to Demo Days or incubator programs to get to know early-stage businesses.
More than half of them invest out of net worth, while nearly 40% have been investing in startups for 2-5 years, with a diverse portfolio of at least five companies in different industrial sectors. They invest primarily within the region and have an initial cheque size per startup of USD20,000-50,000.
Angel investors uphold personal beliefs when making investment decisions.
For the women investors, the top three factors in evaluation are founders, vision/problem statement, and technology; For the men, the top three are founders, business potential, and vision/problem.
Across the board, all the respondents are required to meet founders several times, get feedback from relevant stakeholders / potential co-investors and review key documents from the founders as their core due diligence practices.
More than half of our survey respondents stated that they have personal beliefs that they upheld through their personal investment decisions. More than 50% said that behavior and activities that go against their values would discourage them from continuing with the investment. Nearly 13% said founder-related problems are a significant deterring factor.
Angels are active cheerleaders and not just financially motivated.
Most angels invest for both returns and learning (with/from startup founders). The responses from the survey have confirmed this observation from both new and experienced angels. This is an excellent point to take note too for some of the founders who have the misinformed notion that angels purely invest for altruistic reasons.
Angels are primarily involved in offering advice, network, and strategic inputs; very few are operational.
Regardless of their current active employment status (most angels are full-time employed), most angels are non-active to quasi-active with their portfolio companies’ operations. Logically angels care about the companies’ performance and keep in touch with founders to get business updates.
Less than 15% of the respondents are operationally active (in the startups’ businesses), and most are only involved on the board level, “support from the side,” or “opening doors.”
Moreover, angels with longer years of angel investing experience are more active in supporting their portfolio firms while keeping arm’s length (do not get into the operational level); those who have indicated to be “passive investors” are those with fewer years of experience.
Similarly, those with board seats tend to have longer years of investment experiences and support experiences. This probably has to do with the angels’ comfort level in working with the founders.