Interview with Andy Ayim MBE

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Growing up as a first generation Ghanaian in the UK, Andy noticed an enormous gap between White British people with generational wealth and the first or second generation Africans in the UK.

Despite adversity, Andy became a Managing Director at Backstage Capital. He has since worked in a range of product roles in companies such as Investec Bank and WorldFirst, which was acquired by Ant Financial for $700m.

However, he noticed something he calls a ‘mirrortocracy’ — white middle-class males who went to Oxbridge or worked at investment banks were more likely to invest in people like themselves. This leads to less than 3% of venture capital going to founders from minority backgrounds and less than 1% going to female founders from minority backgrounds.

So Andy founded The Angel Investing School, where he trains professionals from all backgrounds on how to get started with investing in startups.

1. What was your inspiration for starting the Angel Investing School?

Back in 2018, I was a Managing Director of a VC firm called Backstage Capital. While I was there, I helped them to set up an accelerator programme in Philadelphia, L.A., Detroit and here in London. We raised $5 million, which we invested into 25 different startups, with each receiving $100k. And what we quickly realised was that a lot of these startups are raising funding rounds of $300k or $500k, so our contribution wasn’t enough to help them close their rounds.

Most of them had black, female, or LGBTQ+ founders. So when I saw them struggling to close their rounds, I questioned actually who the networks they were pitching to were.

Often, you’d hear feedback like “I can’t relate to this product. I think it’s a very niche problem”. But we were talking about a problem such as black hair care, which is a multi-billion pound problem across the world!

But investors couldn’t relate and didn’t bother doing the homework. They didn’t try testing it on people in their network nor widening their network to gain empathy and understand the customers’ problems.

So as I saw these situations around me, I wanted to educate and professionalise angel investing. I wanted to really get into professional networks where we have people with wealth, but just don’t know how to get started investing in startups.

And it’s not just for diverse audiences, anyone can take the course. But we intentionally want to make sure that people of colour and women go into the cap tables of the fastest growing startups. Our participants are 75% people of colour and 52% women, and that’s by design. It’s not on our website,but actually we’re intentionally making the effort to get into different networks and make that possible.

2. If someone had a great idea for a tech company and was looking for an initial investment to get it off the ground, how do they get their company on your radar?

So the best thing founders can do is to do research. Find out who invested in other companies in your category or similar. Certain databases can give you access to different pitch books. There’s CrunchBase and there’s also a UK free database called Data Commons, which allows you to look into the investors of early-stage companies.

You can also become a member of the UK Business Angels Association, which allows you to look up all different angel syndicates, which is what angel groups are called, across the UK. It allows you to filter them through different areas, like B2B Tech or people that invest in orphanages. You can get really granular and focus your efforts on finding the right people.

Last, there’s a very underrated way, but it’s really the most important channel for investors’ recommendations. Speak to founders, build those relationships, and get them to recommend you to their investors. Because the investors will take the meeting if it’s coming from a founder that they’ve invested in before and have a good relationship with. It’s really another good route to get in through these referrals from other founders to get that introduction.

3. What kind of tech companies do you find to be the most appealing as an investor?

As an angel investor, you’re investing so early that there’s limited data. The company hasn’t been around for long, so they don’t have the performance data. That makes it a very high risk.

Therefore, you’re not making that decision to invest based on their trading history over the last few years or their accounts. 80% of the decision making is down to how you connect with the founder and how much you believe in their ability to execute on a great idea and capture a market.

4. What exceptional qualities do you need to see in a founder or founding team to know that they’re worth backing?

One of the most memorable conversations was with a founder of Tambua Health, which is a healthcare startup that uses radio frequencies for ultrasounds for women or during pregnancy.

I will never forget what the founder told me in our interview: “This is my life’s work and my reason for being. It’s what I’m here to do.”. And I believed him. He was solving a real pain point that he had experienced himself.

But these types of founders are resilient. They’re doing this to solve a problem that’s meaningful to them. So I think that’s so important in terms of motivation — why are you doing what you do?

5. So what are some of the red flags that you see that you often see in founding teams or founders?

One of the red flags I often see is when founders are focused on investors rather than their actual customers. They’re spending too much time trying to chase investors. You’re building a business to solve a problem for customers, not investors. So that’s a red flag for me.

Another red flag that I see in founders is when they’re not really solving a true pain point for themselves, but ‌they’re attracted to the game of entrepreneurship. Like they hated their job, so instead of getting a new job that they love, they want to be their own boss. It sounds sexy, and they don’t want to quit because they’ve already put this out on social media. Now there’s social pressure. They want to live up to expectations and carry this dead‌ horse. They’d rather do that than put the ego aside and admit it actually wasn’t for them.

6. What’s the one thing that you’ve learned about angel investing that you wish you had known when you started this journey?

You’re more likely not going to make any money. Because if I’d known that earlier, I would have approached it in a more purist way. If the bare minimum is that I will not make any money, am I willing to go along this journey in order to learn how to build a business? Am I willing to take all of that as the upside if it ends up not making any money?

And it’s a very honest question to ask yourself. Because then you ask yourself: “How much can I afford to lose?”. The good thing about angel investing from a mental model perspective is that the downside is limited. The downside is how much you choose to invest. So if I invest £2000, it doesn’t get any deeper than that. It’s not like trading on the stock market where I can lose much more. I’m not at a casino.

And the upside is limitless until that startup fails or succeeds. We never know how much the upside could go up to. So that’s why I feel like it’s such a privilege to go into angel investing, given that limited downside. As long as you accept that you’re going to go on this learning journey, you may not make any money, and you’re at peace with that. There’s actually so much to gain from this journey in terms of networks, lessons learned, experiences on how to build a business. Let alone a financial return, if you’re lucky at the end.

You can connect with Andy on LinkedIn, his personal website or in person at the Angel Investing School.