Content
In this episode, Nikolaus D. Bayer, CEO of the Business Angel Deutschland e. V. (BAND) and Business Angel of the Year 2020, his experiences and strategies in investing in startups.
He describes how his career led him from AI entrepreneur to startup investor: After the successful sale of his company, he began to invest his knowledge and capital in young technology and climate protection projects. In doing so, he attaches great importance to careful risk diversification and a clearly defined portfolio approach.
To achieve solid returns in the long term, he advises making at least ten commitments and not shying away from setbacks, as only about 10% of investments really bring resounding success.
Nikolaus explains how to deal with valuations in the early stages: While high pre-money valuations and caps in Convertible loans often appear as a bargaining chip, it exposes many common assumptions as the "Wild West".
Instead of flying blind, he recommends looking at benchmarks such as Series A founder shares (at least 50% for the core team) and typical dilution rates of 15-25%. In this way, a realistic starting point can be created without disempowering the founding team. Convertible loans , which are agreed without a cap, he rejects in principle, as they often lead to legal complications later on and do not confer real shareholder status. He also points out possible notarial duties that entail additional costs and uncertainty.
Another key issue is the quality of the founding team. He emphasizes that a mediocre team does not lead to success even the best idea. He conducts detailed one-on-one discussions with all founders, checks their coachability and now also uses personality tests in the context of individual investments to analyze team dynamics and diversity. For him, more decisive than any technology is the ability of founders to master conflicts, to take a step back when necessary and to grow together.
As an umbrella organisation, BAND networks around thirty regional business angel networks and several hundred direct members throughout Germany. Nikolaus D. Bayer describes how beginners can use the website business-angels.de or through local meetups. There they not only receive deal flow and further training, but also valuable exchange with experienced investors. The member networks offer workshop formats and pitches in which you can actively participate and learn how Due diligence and which legal and tax pitfalls must be considered.
In the end, he summarizes his most important recommendations for action:
- Only invest free capital that can be tied up in the long term, and
- plan your investments over five to ten years.
- Use angel networks to continuously generate new deal flow and learn from experienced mentors.
- Always negotiate valuations and participation models transparently and don't let yourself be driven by supposed scarcity or FOMO.
After all, if you spread your risk, you can make successful startup investments even in a volatile environment. This episode thus offers a comprehensive roadmap for all those who want to start seriously as a business angel and build their portfolios sustainably.
Key takeaways of the episode
Portfolio Approach & Risk Diversification : Diversify at least ten investments to cushion defaults and perform positively on average in the long term.
Clarify evaluation at an early stage : Always demand a fair pre-money valuation or negotiate cap clauses on convertible loans.
Due diligence & team check : Check not only the product, but above all team coaching ability and founder chemistry.
Use the network : Become a member of the BAND's Angel Network, attend local events and benefit from workshops and mentoring.
Sustainability before speed : Rely on long-term sustainable business models instead of quick exits or exaggerated valuations.
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