All deals we release start off with an email to the Angel List. In this email we include a brief description of the startup, as well as a link to the Online Dealroom.
The Online Dealroom contains all the information about the startup that helps investors do their own due diligence and make their investment decision. It will include videos and documents relating to the startup including their pitch deck, cash flow forecasts, and patents the startup has among other documents. We also normally include an investment memo which we write up explaining our point of view and why we are personally investing into the startup.
The Dealroom also contains a Q&A section. Investors can use this Q&A section to ask questions directly to the startup founder. We then organise a webinar call with the founder which investors can attend to answer these questions.
Finally, if an investor is interested in investing in the startup, they fill in the investor commitment form which is found at the end of the deal room.
We review dozens of startups every month in our search for the next big thing. Most of these startups come from our deep connections within the startup community which we have built up over the years, whether that is our relationships with other venture capital funds or successful startup founders.
As the Angel Syndicate grows and we start making a name for ourselves through the investments we make, we are also seeing an increase in the number of startups that approach us directly for investment.
1. Startups submit their applications to us either through the website or through an introduction by a mutual connection. Every startup starts off with a pitch deck. Once we review the pitch deck and are interested in finding out more, we organise a call with the founder of the startup. Most startups that approach us are rejected at this stage.
2. On the first call we have with the founder, we try to understand as much as possible about the business and try to get to know the founder himself. If we are comfortable with both the business and the founder, and believe this startup has the potential to reach massive scale, we would ask the startup to send us further documents to review.
These documents include financial forecasts, past financial accounts, customer agreements, any patents the startup has and other relevant documents. This is the stage where we will do in depth due diligence into the startup, the technology the startup is building, the industry the startup is operating in, and any competitors the startup has. We would also bring in an industry expert at this stage for their point of view if we think that is needed.
3. After the due diligence process, if we are still happy with the startup and interested in investing, we will then organise another call with the founder to ask any follow up questions as well as to negotiate the terms of the investment. The terms include the valuation of the startup and how much we will be investing.
4. Once everything is agreed upon, and we are personally investing in the startup, we then send the deal out to our investor list to give our Angels the chance to invest alongside side us.
Yes. We personally invest in every startup ourselves. Only once we are comfortable investing in a startup ourselves do we release it to our Angel List for the chance to invest.
We charge a 2% administration fee on all investments. This is to help cover some of the legal and adminstrative costs that we go through for which there are many. There are currently no other fees on your investment and there is no carry fee so all profits made on your investments are kept by you.
Once an investor fills in the investment commitment form, they will be sent an email asking them to make a £1 test transfer to the startup. We do this to make sure investors have the correct banking details before they make the full transfer.
We will confirm with the startup founder that he has received the £1 from the investor, before letting the investor make the full transfer.
Once you transfer your investment, you will be asked to sign legal documentation that certifies your investment. For all investments, we bring our investors under a nominee structure to invest as one entity.
Documents you sign:
- Declaration of Trust
Documents we sign on your behalf:
-Subscription and Shareholders Agreement
Documents we receive from the startup that certifies our investment into the startup:
Once all funds are transferred, all legal documentation is signed and the startup has issued us with our share certificate, we are now official investors into that startup. The startup founder will issue regular investor updates so we can monitor the startup's progress. All updates are sent to you via email, but we also upload it to the investor portal.
Startup investors don't normally receive dividends from the startup. Instead, investors make their returns through the value of the shares they own in the startup. The return is made once a startup exits. In the up case, a startup exit is when the startup is either acquired by another company, or lists on the public stock exchange and early investors get back their investment multifold. In a loss making scenario, a startup exit is when the startup folds and investors are entitled to whatever assets are reminaning of the startup. An exit event normally happens between 5-10 years after investment, although startups typically fund-raise every 12 - 18 months and so investors will see the value of their shares go up over time.
Some of our startups are eligible for the UK Government's SEIS or EIS schemes. We try to invest in the best startups around the world, regardless of the tax benefits that come with them. That being said, many of our investments are SEIS or EIS eligible. SEIS and EIS is a UK government scheme to encourage more investment into early-stage companies. This tax scheme is only available for UK tax residents and gives investors 30% to 50% of their investment back in the first year of investment in the form of a tax rebate. You can read our full guide to SEIS and EIS here: https://www.islamicfinanceguru.com/investment/how-to-claim-back-seis-eis-tax-relief-the-complete-2020-guide/
A nominee structure is a very common legal structure used by Angel Syndicates when making investments. The nominee company itself will not hold the beneficial title or voting rights to the shares – they lie with you as an individual. The nominee company will merely hold the legal title but will act at your direction. This is all reflected in a declaration of trust document between you and the nominee company. The role of the nominee company is to make life easy for two main reasons:
1. Signing the docs as one entity rather than a group of individual shareholders which is time-consuming and increases legal fees for the startup and is cumbersome for everyone.
2. It keeps the startup’s shareholder table much cleaner.
You are responsible for your own tax position. As the company is a nominee company, it is “looked through” to the beneficial owner in terms of tax. So the tax position is just the same as if you had bought the shares yourself. Any tax benefits (for example the EIS scheme) you still get the benefits of.
An Advanced Subscription Agreement is a standard equity agreement used used by investors, and is normally used when a startup does not want to set a valuation for the company at current. The intention behind an ASA is to pre-pay for shares that will be issued in a subsequent funding round. Therefore the valuation of the company is not set at the current moment, but rather when the round closes. Investors in the ASA are normally given a discount to whatever valuation is set in the subsequent round. An ASA is used for a number of reasons:
1. The startup is in it's early stages and prefers to set its valuation in the future once it has gained measurable traction.
2. The startup's fundraising round will be drawn over many months and so to close with current investors and not have them wait for the full round to close, an ASA will be used.
3. The startup is fundraising a 'bridging round' (a smaller fundraise normally used to inject capital into the startup so it can hit certain metrics before it raises its larger round) between two larger rounds.
There are a number of agreements that are similar to ASA's such as SAFE agreements (normally used in the U.S.) or convertible notes, although both of these differ slightly.
Yes, all our investments are sharia-compliant. Startup investing by its nature is Sharia-compliant as it is a pure equity based investment. We screen startups to make sure they are not operating in any non-Sharia compliant industries such as alcohol or gambling. Additionally 80% of our current investments are in impact industries.
Some investing mechanisms bear interest such as convertible notes, which we make sure not to use for our investments. If we find there is a need, we will sometime have startups provide us with written documentation that they will not engage in non-Sharia compliant manner, and give us the option to withdraw our investment if they do decide to do so in the future.
One of our founding partners, Ibrahim Khan, has a masters degree in Islamic Finance as well as an Aalamiyah degree, and so he does majority of the screening. In addition to Ibrahim, we currently have two other Mufits that we engage with when needed. You can view their profiles here: https://www.islamicfinanceguru.com/about-us/
We have written a great guide on how you can calculate Zakat on your startup investments which you can read here: https://www.islamicfinanceguru.com/investment/how-to-calculate-zakat-on-startups/
As startups are risky investments, it is important to build a portfolio of startups you invest in to mitigate your risks. It is recommended startup investors build a portfolio of 10-20 startup investments over the course of 3-5 years.
Yes! We have investors from all over the world that are part of the Angel Syndicate. There is no difference between UK and International investors.
No, we invest in startups globally. While most of our deals come from the UK, we invest globally and frequently review startups from North America, South America, East Asia, the Middle East and Africa.
No. Startups are high risk investments that frequently fail. When we invest in startups, we look for the companies that have the potential to make at least a 10 times return on our investment. This is so the few startup that do succeed make up for the many startups that will fail.
Startups are both long term and illiquid investments. This means you are unable to liquidate your investment before a startup exits unless you find a private buyer who is willing to buy over your shares.
We typically invest into 0 - 2 startups a month depending on the quality of startups we see. This is around 1-2% of the startup we review every month.
Still have questions? Mail us at:email@example.com