Dear Financial Voice Reader,

I write to you a column started in Paris and finished in Rome. Throughout Europe investors are looking for the next Uber, Google. If you are looking to make angel investments into a company these are 5 essential ways to follow to find a unicorn (a billion dollar company).
One: Crowdfunding Sites: These make it easy to make small investments into pre-due diligence companies. Always start small. Try invest in something you know a little about, rather than relying on their sales pitch alone. Diversify across many small investments. You will be a passive investor – such as in Crowdcube.co.uk.
Likelihood of finding a unicorn: 1 in one hundred thousand.
Likely average return across 10 investments: 20%pa
Two: Co-investment Sites: These are really crowdfunding sites, but ones like Angel.co allow you to invest alongside established known celebraty angel investors like the backers of Twitter. So they reduce your risk. Remember you’re unlikely to get to meet the founders. So you will be a passive investor.
Likelihood of finding a unicorn: 1 in ten thousand
Likely average return across 10 investments: 30%pa
Three: Angel Investments: Companies like Envestors allow you to meet the companies they’ve due diligence and their owners and be an active investor. Do this is you think you have something to add to the company which would then let you get your money back pretty quickly, example being through an introduction. Here you will want a company you know something about and expect to be active. The danger is you put too much money into the company.
Likelihood of finding a unicorn: 1 in ten thousand
Likely average return across 10 investments: 30%pa
Four: Small Business Lending Sites: Here you are simply a bank. You are lending money to a company and expecting to get a return on your money. You’re money is spread across many companies to reduce your risk of default. This is a safe option.
Likelihood of finding a unicorn: Zero (you don’t own the company)
Likely average return across 10 investments: 10-14%pa
Five: Be a Limited Partner: These are investors into a venture capital or private equity fund. Minimum investments sizes are around $100,000 and you pay fees of 2% annually of the capital you give them plus 20% typically of your profits. Again you’re a passive investor because you are investing in a fund managed by experts which invests in a number of companies.
Likelihood of finding a unicorn: 1 in thousand
Likely average return across 10 investments: 20-24%pa
Key Points: The key things to ask yourself are whether you have some secret knowledge to help grow the company. If not, then you will be a passive investor spreading their money across multiple investments and reducing your risk further by investing alongside well-known investors with a good track record. Even this is a ‘spray and pray’ approach.
The good thing with all these innovations are the ability for people to rely on more than just the paltry rates they get at a bank, and given the need for alternative forms of financing, these are a great innovation and genuinely allow you to get involved in multiple businesses – potentially everyone wins.