I cannot think of any better way to contribute to real economic value creation in a way that is aligned with your values!
Brigitte Baumann is founder of efino and Go Beyond Investing. She is an early-stage financing expert, GP of start-up venture funds, angel network manager, board member, serial entrepreneur, European Angel Investor of the Year 2015, and top 3 Female Business Angel in Europe 2020.
Brigitte has 30+ years of experience in bringing new technologies to market in the US and across Europe. She is a keynote speaker, trainer and consultant, focusing on designing educational content for angel investors, business angel network managers, start-up board members, entrepreneurs seeking financing, and corporates.
Brigitte’s kindness and her passion for creating positive change and opportunities for all, through innovative ideas and education & knowledge sharing, is evident in this compelling interview.
Keep reading and find out about the joy of being an angel investor, how to perform as an entrepreneur, the value women bring, what success really is, the power of diversity, what we can do to strengthen the entrepreneurial ecosystem in Europe, and so much more!
I love being around these really cool people. I can support not only what they do, but how they do it!
Of all the good and constructive messages you are putting out in the world, what have you found people most need to hear? What moves them and gets them moving?
This always happens when I say: ‘You, too, can be a business angel!’. A lot of people think investing in start-ups is for someone that they are not. And when they get it, and they say, ‘You mean me, I could do it?’ - that is big Aha! for many of them, and it was for me, certainly.
You don’t have to know everything and you can always add some value.
What is the misunderstanding, why do people think this is not for them?
The main concerns people tend to bring up are risk, money, time, expertise. Investments in start-ups are high risk investments, so people think they don’t have money that they could risk. Then there is the assumption that one needs large amounts of money – hundreds of thousands or millions - in order to invest. Time also comes up – people think they will need to put in a lot of time, which they don’t have. And then, people think having expertise in one functional area or in one sector is not enough – for instance, if they only understand marketing, or the travel industry, they don’t think they could invest, as they would never be able to look at all aspects of the company during due diligence and make the right decisions.
Let’s debunk some of these assumptions.
Due to the very high risk nature of angel investing, one should not invest more that 2-10% of one’s wealth in this asset class. For example, if someone has a total wealth of $500k they could invest up to $50k in start-ups. This could be enough to build a portfolio of 8-10 investments. This is the minimum recommended to mitigate risk. There are angel groups that make it possible for investors to invest $5.000/year. This is the equivalent of $20/day – which is what you pay for a nice meal or the amount you put in a savings box. When people realize this, it puts things in perspective for them. Investing this money is risky, but if you pay for a nice meal instead, the money is also gone. When you are an angel investor, you could lose money, but you can also have amazing rewards.
When it comes to time and expertise, if you invest with an angel group, you can do so within 8-12 hours a month and you can learn a lot from the others. Also, you can make investments in sectors you never would have thought to make, as you can rely on other people’s experience. No one has to know everything, because every angel investor knows something, and other angels bring their perspective to an investment. This means you don’t have to know everything there is to know, and you can always add some value.
Being around people who take problems and see them as opportunities is to always be around hope.
What do you love most about angel investing? What about your work brings you joy?
Hope is the first thing. Being around people who take problems and see them as opportunities is to always be around hope. Even though the chances of succeeding are sometimes small, this shows there is always hope for a better tomorrow.
Secondly, I cannot think of any better way to truly contribute to real economic value creation, besides being an entrepreneur myself. I also invest in public companies too (start-ups are private companies), but in the public it’s not very tangible. Whereas when you are an angel, the money and the expertise of the angel group go directly to implementing an idea, to creating value. So being an angel gives you that feeling that you are really and actively making a contribution.
The third is being around these really cool people, whose values and goals I share. I really like who they are, what they are doing, and what they believe in. This way, I can support not only what people do, but how they do it. It makes me feel like I am less alone with certain sets of values and that I can contribute to address some of the big global challenges we face.
Then, I love meeting amazing co-investors – I love this win-win attitude that we share, in the angel investment space. I have made new and good friends who are fellow business angels, people I have a real connection with. We got excited together, and we dared to help, even when it involved taking some risks.
And finally, there is the actual possibility that I could hit the jackpot, and that would feel really good! Laughs. Just recently, a friend of mine, who had been an angel investor for 10 years, got $500K in an exit, and he was just sharing his excitement with me. It's rare, but it happens. It can feel quite amazing when you suddenly have $500K coming!
I am guided by my instinct, and I think the entrepreneur’s character is the surest thing you can bet on.
Throughout all your work as an angel investor, what is one value you feel you can always count on? How do you know what’s right?
Well, first it helps to know that there is no right and wrong, that there is no truth, there are different truths. One thing that I love about the last 20 years of being an angel investor and an entrepreneur is that failure is not even a word in my vocabulary. When things go wrong, I just try to turn it into something that I can learn from, and then I move on.
But if I were to synthesize, I am guided by two things: one is my instinct. If something doesn’t feel right, no matter how appealing it looks, I choose not to invest - maybe something about the business doesn’t feel quite right, or maybe there is an element of human interaction that feels off. There were deals I did not make, and I may have lost money that way, but in the long run I am very happy that I followed my instinct.
The second is the entrepreneur’s character. I have plenty of deals that have done well, and deals that haven’t done well, but the core of the entrepreneur’s character, which is a crucial factor in my decision to invest or not, has always proved to be very important, indeed. Even when the company failed, seeing the entrepreneur react when things got very tough, how they worked with investors, made me happy with my decision. The entrepreneur’s character is the surest thing you can bet on – it is what determines how well they will be able to navigate the inevitable ups and downs that will occur along a company’s journey.
I have always cared not just about success for successes’ sake, but success that contributes something, that serves a purpose. I am a purpose-driven investor!
Talk to us about impact investing - what it is and why it’s important. You speak about doing well while doing good. Let’s elaborate on that.
What impact is and how it can be measured differs from person to person. We will probably never get to one way to define and measure it.
As far as I'm concerned, I have always cared not just about success for successes’ sake, but success that contributes something, that serves a purpose – and purpose can be addressing some core challenges - such as those included in the UN’s SDG (Sustainable Development Goals). I have also cared about success that supports the transformation, the change of mindset that needs to happen, both in business and in everything we do. We can’t just look at shareholders; we need to look at all stakeholders, we need to look at the broader impact that the investments we make and everything we do have on the bigger picture.
I find that, on average, this holistic approach comes naturally to women, when we start investing. When I was pregnant, I realized I cared about what was happening in my womb, and I also cared about what was happening around it, because of the way it impacted the world and the future for my child. That’s what helped me understand why I was uncomfortable when we were only talking about profit and what you measure, in the short or long-term. I felt much more comfortable looking at things from a broader perspective, one that would also consider the following 20-30 years. When you are pregnant, you are aware of the things that bring short-term gain, but will also have long-term impact. So it feels very natural to care about what happens long-term.
Therefore, taking many things into consideration beyond profit is something I have always believed in, so it makes sense that I would incorporate that into my investments. It’s the same with being sensitive to others - when you do something, you think about how it will impact your family and others you care about. So, naturally, when you think about the broader benefits and broader consequences, when you look at things in a broader context, you become purpose-driven, as an investor.
On average, women entrepreneurs are not afraid to build businesses that also have a significant human component for scale.
What do you wish people understood better about women? What do women bring to angel investing, entrepreneurship, business, leadership? What are people in danger of overlooking, when it comes to women?
Different can be equal. Many of us, women, as entrepreneurs, build businesses that are less about pure technology. And we often test it quite a bit before we go and start raising external money. Women may start businesses that people will consider less scalable, because, on average, we are not afraid to build businesses that also have a significant human component to them.
It’s too bad that some of these businesses are not even considered by investors, even though they could actually become large and exitable. I am part of the Ernst and Young Entrepreneurial Winning Women program. All selected companies are headed by a woman and need to meet growth and scale criteria. Many achieved their success without angel or VC money. Many say they considered it at some point, but did not have a good experience and decided against it.
What’s also interesting is that, very often, women entrepreneurs are not solo CEOs, but co-CEOs, which can make things confusing. Also, often times women ask for less money, which tends to be regarded as being less ambitious, when it actually could be more judicious. So, different can be equal!
We must embrace different models and adjust the system – for instance, as investors, maybe we should think of introducing revenue sharing in addition to some equity to be able to invest in a wider range of start-ups.
I find it sad that right now we have one model of investing and one model of success (which is the unicorn), which means that a lot of entrepreneurs, including women, are left out, because that’s not how and what they are going to build. We are missing a lot of opportunities. Different is good!
If we want more diverse entrepreneurs to be financed, we need to have diverse investor communities.
Tell us a little about Rising Tide Europe.
When it comes to Rising Tide Europe and all the work that I do around engaging women in this angel investment space, we have several goals in mind:
First of all, from a wealth management point of view, it’s really important that we, as women, learn about all different types of investments we can make with our money, become engaged in this, see where our money is and share in this wonderful era of angel investing.
Secondly, if we want more diverse entrepreneurs to be financed, we need to have diverse investor communities – and diversity is about all sorts of different dimensions and intersections. Lack of diversity in the investor community is one of the main reasons why certain types of entrepreneurs, including women, have been under-financed. We all have implicit biases, which are good and serve a purpose, therefore if we become aware of our implicit biases and become more open, and, at the same time. bring around the table people as angel investors with different implicit biases, we are more likely to invest in a broader set of entrepreneurs.
Being self-employed is also important. It can be an amazing personal journey to first try to self-sustain.
Tell us what Europe can do to better support the entrepreneurial ecosystem?
First, I think it’s important we see that being self-employed can be a first step towards becoming an entrepreneur. The approach that’s trending right now is ‘If you can’t get a job, then become an entrepreneur’. But I think that it can be an amazing personal journey to first be self-employed and then consider being a full-fledged entrepreneur.
Secondly, entrepreneurship has been very much linked with higher education, patents etc. But bringing entrepreneurship to the space of technical and vocational training would increase the breadth of the entrepreneurial ecosystem.
Moving on to the traditional entrepreneurial undertakings and to start-ups that could raise equity, there are still things to be done in terms of finding financing - for example, making angel syndicates easier and thus more prevalent, and having broader types of financing available. I think this would benefit start-ups in a lot of countries.
We still need to have a lot more people dare to be business angels, and for corporates to be more involved. There are many ways in which they could be involved. Entrepreneurship would have a lot to benefit from it.
Dare to be you, in addition to dare to go for your dream!
What advice do you have for entrepreneurs and investors? What do you find yourself telling them over and over again?
To investors I say to treat investments as an asset class: build a portfolio, make sure you have money to reinvest, make sure you join a learning organization, and invest with others.
To entrepreneurs I say dare to be you, in addition to dare to go for your dream.
Due diligence goes both ways. The investor and the entrepreneur must really understand each other.
You say due diligence goes both ways. Tell us more about this.
Even though making an investment is a transaction, it is also a 2, 5, 10-year relationship between an investor and an entrepreneur, until the investor makes an exist. So it will be very important that they understand each other.
We need to understand what we each want of the company, how we each can contribute, and, in tough times, we need to know what our underlying values are, because those are the values that will push us to make a decision one way or another.
When it truly comes from everything in me, as opposed to just my brain, when I truly live it, the chances for success are much higher!
Some years ago you said that, out of 10 entrepreneurs, 4 went under, 4 stayed afloat and 2 performed. Are these numbers still valid? Tell us what makes businesses go under, what makes them perform?
On average, these numbers are still valid. Here are some of the main reasons companies fail.
First is the mismatch in terms of timing and product-market fit. I have built businesses that were too early. 10 years later, people came and raised a lot more money than we ever could for the same business, because the time was right.
The second is when you have failed to raise money, and you find yourself in the position of not being able to continue the business as you had envisioned.
The third reason is human, usually – something starts happening internally, between the founders, or the founders and the shareholders, or the board. It’s when the energy is used for internal issues and it becomes negative, instead of being used for the challenges outside. The challenges should be outside, and not inside the company.
As for the reasons companies perform:
One is luck, for sure.
Two is knowing how long you should push and when you should rethink – because often you do have to push people way beyond some of their limits, but you must also know when it’s time to stop and rethink.
And I think that the third one, which has helped me (and this goes for any business I have built), is that when it comes from everything in me, as opposed to just my brain, when I truly live it, I feel that somehow the chances for success are much higher. The businesses that are solely based on analysis collapse faster when facing a tough situation, as opposed to when businesses are driven by something that comes from deep within. The latter go through the ups and downs more easily – because you really have to hang on! There are very few start-ups I have seen that did not have roller-coaster rides.
Curiosity, gratitude and the belief that humanity is good keep me inspired!
How do you stay inspired?
I wake up every day! There is this wonderful thing about happiness, which is gratitude. And it’s true! I just get excited about lots of small, beautiful things that happen every day. Like this conversation we are now having, or the bird nest right under my roof, I love hearing the birds every day! And then there’s the belief that humanity is fundamentally good! And curiosity - I am super curious, and it feels good to be interested in many things, your spirit is always up and moving!