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How to mitigate the risks of venture capital

By 26/05/2017June 7th, 2020No Comments

Source: The National –

Getting into angel investment can be scary. You could lose everything – even if you do it right. So how do you best mitigate the risk?

Angels had plenty of advice for the crowd attending Angel Rising earlier this month at New York University Abu Dhabi.

“As an angel investor, you are going in with your eyes open that you could lose the money,” says Vikas Shah, a visiting professor of entrepreneurship at the MIT Sloan School of Management.

“That’s your maximum risk here, plus reputational risk and all of those things. But you are looking at that business and it’s the gut feel you have. Question two, can that team execute? If it makes sense and that team can execute, that’s the bulk of my risk mitigated.”

Saud Al Nowais, a commercial counsellor for the UAE to the United States, suggests investing through angel networks and firms such as VentureSouq, which will hold your hand through the process.

“Seek out universities which are doing stuff like that. Identify super angels. Identify principals at large VC firms. Identify sectors with potential growth,” he adds.

For companies on the hunt for an angel investor, someone with a background in the same industry can certainly help you. “You will find what you need is an angel investor with a real background. So for example in medtech, biotech or pharma,” says Mr Shah.

But those with no knowledge are valuable too.

“Sometimes you just want someone who believes in it and will put in money without asking all the questions because they believe in the founder, so similar to friends and family,” says Sharif El Badawi, a partner in 500 Startups, a venture capital accelerator. “It’s funny but it is actually an important point. We need angels to just be angels sometimes.”