What is Angel Investment?
Angel Investment in Malaysia is basically a form of early stage investing into new businesses. The main characteristic of this asset class is that it is a long-term investment (5 years+) with a high risk, high return nature. Capital is given to a startup by angel investors to Startups in exchange for equity.
Angel Investment funding amounts vary widely, and generally, angel investment groups do have more firepower to handle larger rounds of fundraising. Individual Angel Investors do invest large amounts but not often, as they quickly run out of cash to allocate to Startup investments. Usually, larger rounds are done when an Investor is confident that they have found a winner, and when it is the 2nd round onwards.
Angel Investment in Malaysia: Unique Things about Angel Investment in Malaysia
We see some Angel Investors in Malaysia investing through Equity Crowd Funding, with amounts ranging from 20k to 500k per startup. Not to be confused with retail investors, who typically invest 1k to 10k per startup, Angel Investors in Malaysia are defined as HNWI (High Net Worth Individuals). These are individuals with net personal assets of RM3m according to MBAN. Many Angel Investors are registered with MBAN (an association for Angel Investors & Groups by the government) for the tax incentive provided by the government, without any sensitive information required.
As of writing this, there are more than 10 Angel Investment groups in Malaysia. Not all are registered or formal. Many angel investors choose to invest as a group or syndicate to spread the risks of angel investing. Angel Investors & Groups in Malaysia typically invest mostly around RM200-600k.
Recently we are seeing more and more family offices and successful business owners getting into Startup investment. Some have gone as far as creating their own VC arms under their listed companies, as well as creating accelerator programs and startup support programs.
Investors vs. Venture Capitalists
The main difference between Angels Networks & VCs is that angels do not typically run as a fund, and therefore are not managed by professionals. Instead, Angel Investment clubs are often run by Lead Investors, who typically come up with the larger chunk of the capital for deals, for others to follow up with the rest of the investment capital. Lead Investors put in their own money, and therefore are very motivated to make their startups successful.
Typically, VCs tend to gather or hire some professionals as their mentors. In Angel groups, the investors themselves are the mentors. This means that startups then get access to:
- Real business owners/entrepreneurs who are successful (Acquired, Exited, IPO, etc)
- Years of experience in growing a business from idea to exit – which comes along with understanding your pain & joy, how entrepreneurial life is, and so on which professionals do not get. Most importantly, that is for mentors to share every road bump and crash they have had, so that upcoming entrepreneurs know how to move on and grow further.
- Years of networking that can get access to great strategic deals – for example, one deal we did (very luckily) got a startup 8-30x immediate revenue.
This on varies across every Angel & VC. Some Angels and VCs have unfriendly terms and others friendly terms. This is why we encourage startups to talk to as many Angels & VCs as possible. Generally, however, Angels tend to have friendlier terms compared to VCs, with simple term-sheets. We encourage every startup to understand every term in the term sheet, as there are some unfriendly terms out there designed to protect VCs from losing money. Some get it back by using conditions that give the VC more equity, and some allow VCs to claw back capital. Here is an example of some term-sheet jargon.
Beyond Early Stage
VCs are the most effective for startups when it comes to stages beyond early stage funding. This is when mentorship and guidance matter less and capital matters a little more. Typically startups in later stages require more growth and have already tested what works and what doesn’t.
It is worth noting that sometimes, Angel Investment groups do come in to invest at later stages as well. Some are large Angel groups that can easily fund large deals. Although we are not too large of an angel group, we have gone into pre-IPO investments as part of a strategic play, where our mentors can provide value to the company.
Beyond VCs, there are also PE firms that will invest for a controlling stake. They are useful for exit plans, in which startup founders can acquire access to large amounts of capital to create growth prior to an exit play.
We Are an Angel Investment Groups in Malaysia
NEXEA Angels – We run with a group of experienced mentors who are/were entrepreneurs and found success in business. We also have a management team called Venture Partners handling the deals for Angel Investors. If you are an Angel Investor or want to explore being an Angel Investor, you can learn more about our Startup Investment Opportunities in Malaysia.