How Member Engagement Can Grow Your

Angel Group’s Investments

In the July 2022 edition of ACA Data Insights, the Queen City Angels (QCA) presented “What We Learned from Our Data,” a comprehensive study using six years of data related to member engagement. QCA defined ‘’engagement” as a member’s commitment to QCA’s success and demonstrated by their intellectual contributions and participation in activities key to the organization’s mission. QCA members spent 6 months meeting with other investor groups (many ACA members) around the country doing a smart practices study of deal flow and due diligence processes which contributed to the writing of our Standards + Practices Guide. Our members also meet regularly with other groups to gauge DEI smart practices as well. QCA members contribute to our annual Entrepreneur Boot Camp (735 founders have participated in its 22-year history), participate in a weekly Morning Mentoring session with entrepreneurs (over 300 sessions over 18 years), coach and mentor founders and participate in pre-screening companies prior to formal funding app. In total, our members donate 50,000 hours per year coaching founders.

The key activities used to generate the data were focused on individual member attendance at regular investor meetings; serving on deal screening or due diligence teams; post investment governance activities; and/or, serving on standing QCA committees. These activities were collectively used to define “active member (or membership)” in the group, as well as defining member engagement when talking with prospective new members.

To recap from the previous articles, an analysis of the data revealed the following:

Note: The data supporting the above outcomes was presented in two previous ACA Data Insights articles in July and August of 2022.

Once the data analysis work was completed and the conclusion reached that increased member engagement had a direct, positive result on the number of companies being considered for investment and the speed in which those decisions were made, the remaining questions relate to the results/outcomes. Did the increased level of engagement result in better results/outcomes?

In this third and final article of the series, an analysis of the data, as it relates to a wide range of results/outcomes, will be presented along with an explanation of how the data (related to member engagement) were measured and evaluated.

Angel Investor Groups, like other volunteer organizations, are enabled by the level of the individual member’s engagement. Intuitively, one would believe that the level of engagement, combined with members’ experience and expertise, tends to be directly related to an angel group improving its results/outcomes.

Given the findings reported in the July and August 2022 ACA Data Insights, QCA members’ engagement was higher than expected and clearly indicates a broader distribution of the workload. The findings also indicate more members are gaining valuable experience and developing the needed expertise to better evaluate companies coming through the pipeline and make good investment decisions to improve outcomes. Some important questions that are considered herein include:

Recognizing that angel investors (like all investors) desire a risk adjusted rate of financial return on their investments, there are several traditional measurements (ROI, IRR, etc.) available to evaluate financial results/outcomes. The data used in this QCA study only covers six years which is typically too short of a period to enable many start-up companies to reach an exit. However, for this study, QCA selected four QCA portfolio companies that did exit in this period, and even though it is a relatively small sample size, the outcomes of these exits were used in the data analysis work.

There are several results/outcomes that have been directly impacted by QCA’s increased member engagement:

FIGURE 1: AVERAGE INVESTMENT DEAL SIZE

 5. As investments from QCA’s current active Fund have grown, so have the number of individual “sidecar” investments (QCA utilizes a hybrid-investing model). Specifically for companies funded by QCA during 2021-2022, the average number of sidecar investments increased by 50%, as compared to the sidecar investments made during the 2016-2019 time period. Clearly, as the fund investment grew, the number of individual members became more engaged and increased the average number of sidecar investments per deal.

FIGURE 2: SIDECARS

6. As a result of active member engagement involvement with governance activities, more of the group’s portfolio companies are ‘’doing better” than ever before. Specifically, QCA monitors its active portfolio companies and “grades” their performance. Some of the criteria considered includes achieving stated KPIs, achieving financial budget results, managing cash resources, preparing for a successful exit, etc. Using a 0 to 5 scoring system (0 indicating a “writeoff,” 1 indicating “diving,” 2 indicating “surviving,” 3 indicating “striving,” 4 indicating “thriving,” and 5 indicating a “successful exit”), 85% of the group’s portfolio companies are graded as a ‘‘3” or higher.

In summary, utilizing the criteria stated herein, QCA’s increased results/outcomes are directly related to increased member engagement. In fact, as the group reviewed the data, it became clear that ALL its positive results/outcomes are directly tied to increased member engagement. For QCA, member engagement is essential throughout its key activities (member attendance at regular investor meetings; serving on deal screening or due diligence teams; post investment governance activities; and/or serving on standing committees). QCA believes that Engagement + Expertise + Experience + Expectations= Exciting Exits.

Key Takeaways:

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