With 14 deals and 3 exits, Chris Smith, Managing Partner of Playfair Capital, shares his angel investor journey and the biggest lessons he’s learned along the way
Following on from our recent piece focusing on seed stage investors Playfair Capital, we dug a little deeper with Managing Director Chris Smith.
During our conversation, Chris shared his experiences as an angel investor, told us about the biggest lessons he’s learned and reveals the one piece of advice he wishes he’d been given at the start of his angel investing journey.
You are Managing Partner at Playfair Capital. Tell us about your role and what the company does.
As Managing Partner, I split my time across a few key areas – management of the team to ensure that our efforts are coordinated and we are maximising impact; sourcing and reviewing new opportunities; and supporting our amazing group of founders (I currently sit on the boards of Vine Health, uMed, Kyra, Ravelin, Hullabalook, Thought Machine & Sightec).
Playfair Capital was founded in 2013 and we launched our second £25m fund in March this year. We are geography and sector agnostic but prefer deep technologies and B2B business models. Our typical cheque size is £300-500k and we lead about 50% of our deals. We were founded by an angel, who remains our sole LP, and I started my investing career as an angel, so we tend to see opportunities through those eyes and be a little more approachable.
You started as angel in 2008. Why did you decide to become an angel investor and what challenges did you encounter?
It all started way back in 2007 at Bagel Street Café in Redwood Shores!
I was on secondment with my law firm at the time and went to this café most days for lunch. I used to see people flipping open laptops, talking about their business and engaging in back and forth discussions. I soon figured out that these were pitch meetings and started to research investing and how the VC industry worked. I did a lot of reading, thought it was interesting, but didn’t do anything about it until I returned to London.
One lunchtime in London, I was at Wrap It Up! grabbing a burrito. I asked the guy behind the till how business was going and he replied – ‘Great, I’m actually the founder and we’re raising a round of investment now’. A few meetings later, I had made my first angel investment! Now, they have 18 branches internationally.
I backed Wrap It Up! because they brought a little joy into my life with a unique, tasty lunch offering (remember, this was 2008, and the choice of food was fairly limited).
After that deal I became focused on B2B tech businesses – F&B is tough – but I learned a huge amount riding the highs and lows with the founding team at Wrap It Up! who are still going strong.
In terms of challenges, it was really time and capital. Time because I was an M&A/corporate lawyer and capital because cheque sizes back then were typically £25k+ making it harder to create a diversified portfolio. Although crowdfunding has its downsides, making this asset class available to smart investors who are just starting out is one of its major upsides.
You’ve made 14 investments and completed 3 exits. What are the biggest lessons you’ve learned during that time?
Trust your gut. If there is something, however small, that doesn’t feel right, don’t do the deal. On the flipside, if you get a great feeling about a deal, don’t spend your time focused on finding reasons not to do it – they’ll always be lots when you are investing in start-ups.
Don’t rush into a deal. Let what you learn about the business and the founders marinate a little. Take time to reflect. And focus your diligence on addressing any key concerns you have. Angels don’t have the resources of a VC to go deep on research, but test the key assumptions driving your investment decisions.
Look at the little things – typos on web sites, poor reviews online, limited demos, slow response times to emails. I don’t expect perfection, but sloppy errors and a lack of responsiveness hint at a team that will not execute on their plan.
It’s cliched, but it really is all about the founders – their persistence and determination to build a business and deal with difficult parts of the journey (of which there are many!) is a key determinant of success. Of course, great founders still fail, but without these character traits, a business is unlikely to succeed and deliver venture level returns.
What’s the one piece of advice you wish someone had given you when you started angel investing?
The deeply unpleasant feeling of losing money will stay with you a lot longer than the exhilaration of a successful exit! Although you’ll learn the most from the failures.
Find out more about Playfair Capital by visiting http://www.playfaircapital.com.
Want to learn more about angel investing? Enrol in our course The Effective Angel Investor at http://bizangels.thinkific.com.