Women in investment, investing without a background in finance, and importance of due diligence
Podcast transcription - 28th June 2018
Alan Cowley: Welcome to another Invested Investor Podcast. I'm here with Bridget Connell. I won't take the accolade away, so I'll just go straight into it. Bridget, do you want to tell us your background and how you got into angel investing?
Bridget Connell: Hello Alan. Thank you very much for the opportunity to talk to you on Invested Investor. My background is, I have a degree in history and almost three decades commercial experience working in tech roles. The last 15 years of my career I spent working in mobile phones, and prior to that I spent 10 years working in the international logistics sector.
Alan Cowley: Tell me more about the last 15 years in mobile phones then. You must've seen a huge transformation in the industry.
Bridget Connell: It was a really exciting time to work in the sector. And when I first started working the mobile phone sector, one of the first projects I worked on was the launch of the first Blackberry in the UK. And as a program director managing a project like that, one of the things that I really noticed at the time was, it was very difficult to appreciate the impact that having a Blackberry would have on everything that we do and the whole sector when you just receive a large requirements document that describes how it might function. And for years after we launched the Blackberry, I had one of the first trial Blackberry devices in my handbag, and every time I took it out I thought, "We did that. We did that."
Alan Cowley: You obviously had this background in ... We had DHL and then you went to IOT Telefonica. And how many years ago and the reasons for the transition to investing and being an angel?
Bridget Connell: I got into angel investing about four years ago. I hadn't planned to do it. I took up an opportunity to go to a networking event one evening, and at that networking event, there was a woman presenting. And she talked about her experience of getting into angel investing, and she gave a really simple example of how she did it and what angel investing is. And her example was that she had invested 10,000 pounds in a startup business, which was a sporting app. She liked the business. She liked the founder, and she had a marketing background. And she worked with the founder with her marketing experience to help scale the initial phases of that project. And with that really clear example of what angel investing could be and how she could use her experience, I thought, "I think I can do that." And I had spent all of my life working in tech and had been extremely excited about what tech can do, and I wanted to stay really connected to tech, even though I wasn't working full-time anymore. And that was the first introduction.
Alan Cowley: So you had the introduction to angel investing. How did you then approach your first investment? That must have been, not daunting, but it was completely new for you.
Bridget Connell: It was new for me. I went along and joined a syndicate, and that is the big recommendation I would give to anyone thinking about angel investing. I went along to join the syndicate, and the syndicate I chose encourages more women to be angel investors, and it invests in female founded tech businesses, and all of that resonated really strongly with me. And what I noticed with the syndicate was that they had a very credible deal flow, so the quality of the businesses that they get to come and pitch is very good. I now know that. But at the time, it looked good. I hadn't got a lot of experience.
Bridget Connell: And I went along to a pitch evening, a couple of pitch evenings. I noticed a business that I thought was quite interesting. And not only was it my first opportunity to invest, but I then volunteered to coordinate the round, the deal, which meant I rolled my sleeves up and got completely involved and watched what everyone was doing, and corralled and coordinated things. Got very close to the founders, and then made my first deal. And actually, making my first deal was a bit daunting, actually, when you think, actually, "This is the amount I'm going to invest." And then I have to make that first investment. You have to go ahead with it. And once you get over that first hurdle, then I think you're away. It's great.
Alan Cowley: Would you have any other tips for potential investors?
Bridget Connell: Potential investors, I would say that the very first thing is to join a syndicate. If you're not experienced, as I wasn't, and if you're not from a finance background, as I am not, then join a syndicate because the benefit of doing that is that you invest in a group and you share your expertise and your experiences. And the benefit of joining a syndicate also is that there is a curated deal flow, so you have some confidence in the quality of the propositions and the entrepreneurs that you're getting access to.
Alan Cowley: How many deals have you done over the last four years then?
Bridget Connell: I've done five deals over the last four years. What I would say about getting involved in deals is, number one, it is time consuming. I find it time consuming. It's time consuming to go the pitches and see the entrepreneur's pitch. It's time consuming when you identify a business that you are interested in, and then you want to do some due diligence. And I find that it is time consuming doing due diligence. What I have also learned is that in my style of investing, I like to do due diligence. Some angels I invest with are quite intuitive and don't spend a lot of time. They like the founder. They rely on the syndicate to a lot of the work, look at the results, and then just choose to invest.
Bridget Connell: Part of the journey for me is about getting quite close to the entrepreneurs and seeing if I like them, see if I think I can work with them, see if I can spend several years with them and continue to follow on with them, so I like to put the time in to do the due diligence and that can take quite a lot of time. I also travel quite a lot, and so you have to be in the UK quite a bit to be able to do some of these deals.
Alan Cowley: Do you keep the deals just to London?
Bridget Connell: They're all UK based. They're in London because that's where I've chosen to find my deals through the syndicate.
Alan Cowley: Will you keep that going if you invest in more companies? Or are you open to kind of further afield?
Bridget Connell: I'd definitely consider further afield. I think there's a lot happening in the north of the UK, but not non UK businesses. They have to be UK registered for lots of reasons.
Alan Cowley: Okay. You talked about getting close to your entrepreneurs, and that's some that we try and push to investors and entrepreneurs, is create this open honest relationship there because hopefully that will create more successful businesses, startups. Getting close to the entrepreneurs, do you do a lot of mentoring and advising to these entrepreneurs as well once you're invested and on the board?
Bridget Connell: I do in two ways. I do a lot of mentoring of entrepreneurs, but that tends to be more, actually, in accelerators. And I'll come back to that, more early stage. The businesses that I invest in, I stay close to them and add value in two main ways aside from the cash. The first way in which I stay close to them and add value is, I like to think of it as advocacy, so the first thing I try to do when I invest in a business is, look at how they're doing and amplify any key messages, any great news, any profiling I can do of what they're doing, encourage other people to try their products and to be aware of what they do. So a big thing about advocacy and amplifying good news on their behalf.
Bridget Connell: I also, when I'm invested in a business, I then like to stay very invested and amplify success stories and momentum with other investors. So I like to make sure that when I've invested in the syndicate, I keep close to the business, and the other investors keep close to the business so that when the business comes round again and asks for more investment, we already know how they're doing and we already have a view of whether or not it's the right time to ask for investment, and we mentally have pretty much decided if we're going to follow on along. And you can't do that if you don't stay close to them.
Bridget Connell: And the advocacy around with other investors is keeping the existing pool of investors engaged and encouraging other investors to think about the next round, introducing your investors. So I like to support them in terms of advocacy. And the second main area I like to support them in terms of sharing my network of contacts, so access to other corporates, access to other clients, access to people who've trod on the same journey, access to people who may be able to help them open doors somewhere else. So it's advocacy and the networking side is where I like to stay really invested.
Bridget Connell: In terms of mentoring and coaching, because I run my own coaching business, I do spend quite a lot of time in accelerators or at business schools mentoring early stage entrepreneurs and in emerging markets. I spend quite a lot of time mentoring female founders who are building businesses in emerging markets.
Alan Cowley: You just spoke quickly about your own coaching business. And I know this is called Thinking Partnerships. Can you elaborate a bit more on Thinking Partnerships?
Bridget Connell: Thinking Partnerships is a coaching consultancy that I've founded. The main area that Thinking Partnerships looks at is, we work with ambitious startups who want to scale rapidly and raise funding. And I work with senior leaders in large organizations who need to be more entrepreneurial and who are very aware that they are working in large tanker type organizations that find it very difficult to turn, and need to keep their eyes very much on how their sector may be disrupted, and may need to work more closely with entrepreneurs to be able to do that. And in large organizations, the insight that actually different ways of working, taking more risks, doing things in a more agile way is definitely the way to go.
Alan Cowley: Do you bring them together then?
Bridget Connell: I do if I can.
Alan Cowley: Brilliant.
Bridget Connell: Yeah. With Thinking Partnerships, I think that the leadership qualities and the leadership styles required to work either in an early stage startup, a scale up business, or a large organization, there are some very common themes I see, one of which is hiring, firing, delegating, so recruiting the right people, recruiting people who aren't in your image, recruiting diverse teams, bringing them onboard. And if they're not working out, making decisions quite quickly to do something about that.
Bridget Connell: And it doesn't matter at what level of the organization, whether they're a startup or a senior exec, people often struggle to delegate. People often struggle with influencing styles and influencing techniques. So early stage entrepreneurs, when they're trying to influence key stakeholders, when they're trying to influence in large organizations, when they're trying to influence their investors, they need to develop a range of styles to do so. Similar things when I'm working with large organizations influencing styles. And a third theme is around resilience and energy levels and stress and how people deal with those, how they make sure they don't get burnt out, how they manage their energy levels to keep going at the pace and momentum that they need to do.
Alan Cowley: What do you find when you bring together the leaders from startups and large businesses?
Bridget Connell: What I find when I bring together the leaders of large businesses and the leaders of startups is that there needs to be some common understanding of language and how to work really closely together. Startups I work with are often trying to get into a large organization to partner with them or to get them as a customer. When I work with startups, what I notice they struggle with is how to navigate their way around a large organization, how to communicate effectively, and to understand what large organizations are looking for from them in terms of what success criteria might look like and what measures they might use.
Bridget Connell: When I work with leaders in large organizations when they're working with entrepreneurs, one of the things I notice is that to be successful when large organizations want to work with entrepreneurs, they often have to ring fence a team or a way of working that's flexible enough that allows entrepreneurs to come and work alongside them. And key members of the team in the large organizations give them the time to be able to work with the entrepreneurs. For example, sometimes I pilot or trial with a startup working alongside a large organization, it can fail or stall because full-time employees in the large organization have not got the right project code or the right billable hours to allow them to work with the entrepreneurs. And actually, there needs to be slightly more relaxed ways of working to allow those two things to work more effectively.
Alan Cowley: What commonalities do you find between the leaders of startups and the leaders of large organizations?
Bridget Connell: Vision, massive, massive vision, ambition, unbelievable ambition, a real passion for what they're trying to achieve, a real belief in what they are doing, an energy, incredible energy levels. And not so much a focus on: How do you make money? That's absolutely key, but over and above that is: What is it they're trying to do? What value will it add? Why are they doing it? What's the market opportunity? What's the need? How are they going to disrupt?
Alan Cowley: You said also before that a startup is often either trying to have a large organization as a customer, or possibly sell to them, or partner with them. Do you think an entrepreneur or a founder that has a background in large organization is beneficial to them? Or do you just think it's something that can be learned?
Bridget Connell: I think it is beneficial if you've worked in a large organization and you know how to navigate your way around and you know how to communicate your ask very clearly. That's very beneficial, but it absolutely can be learned. And I think that's a key role that a lot of investors and mentors can play in terms of just helping young entrepreneurs navigate their way around a large organization. Sometimes I work with entrepreneurs who have been given the opportunity to work alongside a corporate for six or eight weeks. And at the end of it, then they present back to the corporate what it is that they're asking, what they want. And just helping people be very clear on what their ask is, is key.
Alan Cowley: When they come to you, or you're coaching them, what sort of tips do you have, not just an interactive corporations, but when they're going for funding or when they're interacting with angels like yourself?
Bridget Connell: Top tips for entrepreneurs who are looking for funding and who are interacting with angels is, one, be very clear about the style and the type of information angels are looking for. Angels will see hundreds of deals over the months or the years, or thousands like VCs will do. And there is a standard way of presenting information, and it's what they expect to see. It's not difficult. It's just a process. And someone can help entrepreneurs just get that structure right, get the structure right, so that when you are presenting at a pitch and you have got 10 minutes, in that 10 minutes you get the key information across in a compelling way in the structure at which angels are expecting to hear it. That's the first thing.
Bridget Connell: The second thing is about supporting entrepreneurs in deciding what's the right time to ask for investment. Are they investment ready? And key things around that are: Can they demonstrate traction? Are they clear about what their proposition is? Are they clear about their target market? Are they clear about the problem they're trying to solve? Are they clear about the opportunity? Are they clear about the solution? Have they got facts that back up some of the things that they're saying here?
Alan Cowley: Do you think going to an accelerator is one of the best ways to kind of get all this advice and these resources, so they're ready? Or do you think there are resources out there that ... You said a lot about being ready and knowing that you're ready for funding. How would and entrepreneur know that?
Bridget Connell: How would an entrepreneur know that? I think they would know that from working with some advisors, working with some mentors. And depending on how business savvy they are with themselves, and if they've raised before. Is an accelerator the best way to go? It depends. I think if you're very early stage and you have an idea that you need support developing and you want to leverage what an accelerator will give you. An accelerator might give you access to their customer base, or to their suppliers, and/or give you funding. And if the accelerator is in a sector that your proposition is targeting, that's great. But you don't have to go that way.
Alan Cowley: Right. Flip it on the other side. What tips or advice do you have for up and coming investors and those that want to become invested investors like yourself?
Bridget Connell: Tips I have got for up and coming investors are, be clear about what interests you, and then find a syndicate that provides that deal flow for you. Be clear about how you like to invest and the types of people you like to invest with, and find a syndicate that's got that group of people and that style of investing that really works for you. And then I would say roll your sleeves up and get involved because that's how you will learn. So get involved by coordinating a deal if you can. And you can often coordinate a deal without having to invest in it at the end. Most syndicates are desperate for people to take onboard coordinating a deal, and that's a brilliant way to learn.
Bridget Connell: I'd say tips for investors who are thinking about starting investing in startups and are not sure, is to volunteer to do some mentoring because when you mentor a startup, particularly through an accelerator or through several accelerators and you see them through the duration of the time they're there, you get some really interesting insights as to what goes on for them. Lift the lid and see what's underneath. And there's lots of opportunities in accelerators to mentor.
Alan Cowley: Yeah. Over the last few years, what have you noticed and what have you learned from investing?
Bridget Connell: What I've noticed is that when you first start, it can feel like being in a sweet shop because there are so many interesting ideas out there and so many interesting teams. But as an early investor, my experience is that you have to take it slowly and do the due diligence and watch, listen, and learn from other more experienced investors. And it's by going through that process you then start to get better insights about: Actually, how robust is this proposition? How early is it? How investible is it? When you first start, it's like being in a sweet shop, but slow down.
Bridget Connell: The other thing I've noticed is that other investors are very willing to give you their time and their experience, the benefit of their experience, and I've really appreciated that when I first started. So my approach to becoming more experienced as an angel investor is, I have tried to surround myself with mentors, who are experienced investors, who will give me some mentoring support. And exactly the same way when I look at entrepreneurs and startup business in their early stage, and I look for signs of who they've got as advisors, who's supporting them. Have they surrounded them with great people? I've tried to do something very similar with my own experience and education for being an angel investor. I've sought out people who I like the way they think. I like the way that they do their due diligence. I like the way they support their entrepreneurs. And I've asked them if they'll take time out and meet me for coffee, if they'll spend some time and look at a deal with me, if they'll just listen to me ranting on about what I've noticed. And people are incredibly generous with their time.
Alan Cowley: Have you noticed anything or learned anything from your time working with entrepreneurs?
Bridget Connell: One of the things I've noticed, particularly in my mentoring work I do with entrepreneurs, is that it is often very, very, very difficult to decide that the business is not viable and you need to close it down. And when mentoring entrepreneurs, particularly very early stage entrepreneurs, what I notice is that people are so emotionally invested in their business and have committed so much personally and financially, that they are hanging on to see if they can just get some traction. And they have a sense that, if we just do this, something will happen. If we pivot, something will happen. And they've invested so much, the decision to quit is extremely difficult. And that can be either that their proposition just isn't robust enough, there isn't the right need. There isn't really a problem. They think there's a problem, but there isn't really a market problem they're addressing. Or it could be that they are waiting for investment, and something's happened with the investment and it's not come, and they're hanging on.
Bridget Connell: I've noticed that, and I think that in the whole ecosystem of investors and mentors and advisors, I think the whole ecosystem has a role to play here to support entrepreneurs in making those very difficult decisions. It's almost like giving people permission to stop, giving people permission to pause and rethink about what they're trying to do here. And if you are extremely driven and driving your own business, you won't give yourself that permission. You need someone else to say it's okay to take some time out. Or based on my experience of having invested in X number of businesses, I don't think this is viable. This is my insight. It's not the same as telling them to do it, but sharing insight. I think there's a massive role that the wider ecosystem can do here to support entrepreneurs in this situation.
Alan Cowley: How would you like to see the ecosystem in five to 10 years time?
Bridget Connell: For investors in five to 10 years time, what I would like to see in the ecosystem is more insight and sharing of what happens post investment. I think there's a lot of information available and a lot of conversation around how to get investing and where to look for deals. What's very difficult after investment is to get the wider insight and experience of what goes wrong in deals. And I understand why that is, because a lot of the things that happen in a deal, the information is only available to shareholders. But more lessons learned about what happens along the journey will help investors and will help entrepreneurs.
Alan Cowley: Right.Well hopefully we're doing that as the invested investors. And I'm guessing, also, in the ecosystem you'd like to see more support given to female entrepreneurs because you work quite closely on that. Don't you?
Bridget Connell: Yeah, I do. And actually, what I'd like to see in the ecosystem is, I'd like to see more diversity in the types of people who are investing. And it's not just gender. You must have a more diverse group of people around a pitch event so the propositions resonate with more people, and who have got more experience that they can contribute to support the entrepreneurs in the business and it's journey. So I would really like to see more diversity generally. I think that for women entrepreneurs, you may be aware of the stats already, but Harvard Business School and MIT did some research that showed that identical pitches presented by a male or a female entrepreneur, an identical pitch, if it was presented by a male entrepreneur, it was 70% more likely to get investment. And one of the reasons that is, is that the people who are listening to the pitches, people like to invest in people like them.
Bridget Connell: So if the pitch evening and the studio is full of a type of investor with a type of background, they will invest in a type of business or a type of person that they are most comfortable with. So by having a more diverse group of investors, it gives the businesses and the entrepreneurs more opportunity to get more investment. I don't think that to be an angel investor, you have to have had a background in finance or to have had a successful exit as an entrepreneur. I'm neither of those, and yet I still have some capital that I've chosen that I would like to invest in startups. So I think by not having that experience, I bring a different insight. I bring different things I can contribute, so I think that's really important for potential investors to realize that you don't have to look like all of the other investors. Come with different skills, different interests, different insight, and you'll look at businesses through a different lens and contribute just as much in a slightly different way.
Alan Cowley: Absolutely spot on. Bridget, it's been absolutely fantastic to have you on Invested Investor.
Bridget Connell: Thank you.
Alan Cowley: Thank you very much. And I know that our listeners are going to learn a huge amount from what you've said today.
Bridget Connell: Thank you. I think for me, the reason I've agreed to do this is, if I can encourage and inspire one other woman to be an angel investor, I think that's well worth having taken the time out to do the podcast with you.
Alan Cowley: Fantastic.
Bridget Connell: Thank you.
Alan Cowley: Thanks, Bridget.
Bridget Connell: Thank you.
Peter Cowley: Thanks for listening to another Invested Investor Podcast. You can subscribe to all future podcasts via our website, investedinvestor.com, or via a number of online podcast platforms. And be sure to follow us on Twitter, LinkedIn, and Facebook, to get the most up to date, interesting, and insightful content.