Exclusive interview with Bill Morrow, founder of Angels Den and the most powerful figure in alternative finance

Blue events image Exclusive interview with Bill Morrow, founder of Angels Den. 

We had a great chance to get answers to the most emerging questions around funding from Bill Morrow who was named by City AM the most powerful figure in alternative finance.

What advice would you give to somebody thinking about becoming a business angel?

“The best business angels do not do it to make money. They do it to be part of a journey with a young start-up that involves so much more than a financial commitment. So my key piece of advice  for anybody looking to become a business angel would be to examine your motivation. Understand what you are doing and why you are doing it and know you will be spending your time (and money) building a relationship rather than building a business.”

What are you doing in terms of educating both entrepreneurs and investors as to the benefits of business angels and what are potential drawbacks of bringing in amateur investors?

“Being an angel is not intuitive and there is no one size fits all model. Just because somebody is rich doesn’t mean they will be a good angel and, by the same token, a young business thinking an angel is the answer to all their problems may not actually know what they are looking for in the first place. That is why we run masterclasses for our 13,000 angels, helping guide them in terms of what is expected of them over and above the financial investment” 

What do you look for in business deciding whether it’s promising and is it the same for other business angels?

“There are two things any business must have. Firstly, it must have made a profit, no matter how small. It must have sold something, to somebody by way of proof of concept. Just having an idea, no matter how exciting, is not worth funding. The second element is passion. The business owner must be able to convey their excitement of the business and simultaneously explain it in simple and understandable terms at the same time.”

Despite increasing access to funding, and exponential growth in avenues, such as business angels, to guide new entrepreneurs, the rate of failing startups within three years still stands at around 40%. Why do you think this is the case and what can be done to address it? What do you feel is a realistic figure that could be attained?

“In the eight years we have been trading, 94% of our businesses are still growing. That’s not bucking the trend, that’s creating a new trend and it proves that, with solid processes and a clear understanding, that the failure rate of small businesses can be significantly reduced. In terms of how this can be done, entrepreneurs have two choices; go for short-sighted cheap finance or the money that brings the mentorship, the contacts the business experience and is better suited to the long game. While the former can be appealing given its low cost instantaneous nature, it is the second option that will go much further in terms of securing the long term success of their business.”

How long should businesses consider having an angel on board, given both the business and relationship will evolve and mature over time?

“It’s not a question of time. Like a dog for christmas, an angel is for life. The variation is at what part of the businesses journey the angels value will come. Some will look for an angel that can help with set-up, some for scaling and other for exit – all are equally as important.”

You have a 90% success rate. Despite their careful decision making, banks remain a long way behind in terms of results. Why do you think this gap exists and what should banks do to replicate the success of Business Angel lending?

“There is one difference between banks and angels when comes to investing. angels put a value on the entrepreneur – banks don’t. When it comes to the business plan banks focus on the numbers; the balance sheet, the P&L and the cash flow. Yet a business angel will look at everything else, especially the elements with no inherent value. Things like the passion of the founder, the market, the competition and the story of the business. Elements that endorse why the business exists, rather than just questionable numbers on a spreadsheet.”

What is the best thing to happen to the UK funding landscape in 2015?

“Entrepreneurs began to realise not all crowdfunding options are the same and that there are other ways of doing things that are not all about the money”

If you had one New Year’s Resolution for the UK Funding landscape in 2016, what would it be?

To force crowdfunding sites to do proper due diligence on the businesses that they put forward. There are some ridiculous business valuations going around right now and the industry must regulate this space or be forced out of business by the regulators. Some current deals on fun sites are an accident waiting to happen”

What is your prediction for the UK funding landscape by 2020?

“By 2020 we will have seen a big, big correction – people and businesses will simply not be able to access the money that is available now. There will be efficiency in assessing what is a good deal, which will lend itself to more responsible platforms serving a more knowledgeable base.”

What’s the one question you wish that business owners would ask you more often?

“What skills will the angel bring to my business?”

What’s the best piece of financial advice you’ve ever been given?

“In business the old adage that cashflow is king rings true. However, a more catchy and memorable version was drilled into me by Richard Branson in my Virgin days, which I still use today ‘turnover is vanity and profit is sanity’”.

To find more about Angels Den, visit: www.angelsden.com