An angel investment signals the beginning of a committed and mutually beneficial relationship. Understand more about Lagoon Capital and what it brings to investment relationships from its founder, Ari Korhonen.
1. What can you tell us about Lagoon Capital?Lagoon Capital essentially adds value to software-powered companies in various ways such as equity investment, mentorship, and also access to business networks.
2. Interesting. So, how did you get involved with angel investing at a professional level?I started as a tech entrepreneur, leading Komartek (an Energy & Utilities software company), which we turned into an international success story and had an exit in 2004. Soon after, I started to invest equity and share my expertise with seed and early stage innovative companies. In no time, I transitioned to being a full time angel investor, working in global market
3. Glad to hear about your global interests. What sort of reputation have you built for yourself and Lagoon Capital outside of Finland so far?To be clear, as an angel investor, I see a lot of value investing in businesses at the local level – being local makes it easier to be there for a company, as needed. But, I’ve found a different value in participating in international funds and investment rounds, as well. I’ve been active in Seedcamp and 500 Startups for international early stage startups, and invested through True Global Ventures and Spintop for companies in their earlier stages. When investing internationally, I find it more efficient to do so through a network or fund, where trust for the investment is pre-established.
4. What type of companies are you looking to invest in presently?I’m interested in Technology companies, which includes areas such as SaaS, FinTech, AdTech, e-Commerce, AI, IoT, VR/AR, content, market places and games. The potential field of interest is broad, but, in general, I’m attracted to startups that find software to be some powerful component of their business.
5. At what stage should a company be when they contact you?Lagoon Capital does angel investments, so I do generally invest in a company at a relatively early stage. That said, early does not mean premature: Generally, I won’t invest in pre-revenue companies, and all startups in my portfolio demonstrated some customer validation – sales, pre-sales, etc. – prior to my investment. I invest in growth, not product development, so I like to see something promising for me to help fund, nurture, or guide to new levels.
6. Your portfolio is impressive - 135 angel investments to 40 startups with eight successful exits! You have also invested in nine venture capital funds, one great exit from there too! What is your investing philosophy?
- Do not put all your eggs in one basket – create a diverse portfolio
- Be agile and plan smartly, constant tracking of your own finance and adjusting where necessary
- Reserve a certain percentage of your capital for investments in follow on rounds or buying secondary shares to avoid being diluted
- Treat everyone as an equal. Always respect entrepreneurs and give a positive feedback. Most likely, in return, they’ll put in a good word for you
- The startup business trends evolve constantly, so stay well informed, keep up to date and avoid losing momentum
- You need great deal flow, good reputation, hard work and good luck to be successful, so try to develop all of those, if possible!
7. Besides providing capital, what else do you do with the companies you back?Typically, I serve in company boards as a member or chairman, or function as a senior advisor to the company. Depending on the company’s needs, I’ll help in fund-raising through my contacts or can be very active in the exit phase. For operational advice, I’m available for guidance in the areas of sales, marketing, international expansion, recruitments, company culture and fundraising, among other areas. I’m a committed and available angel investor. I share my knowledge and networks to the benefit of my portfolio startups and founders.
8. As an investor, how hands-on are you? Do you insist on holding a particular position or role in companies when you invest in them?I’m committed to the companies I invest in, so to clarify, it’s not about being hands-on or hands-off – it’s a about being “hands-if”- being available when and how a portfolio company needs. In general, yes, I am on the board of directors or advisory board for most companies I’ve invested in. In many companies, I’ve acted as a lead investor, helping to gather financing rounds. In some companies, I serve as the chairman of the board, more actively guiding the team from early stages to exit. It all depends on how self-driven the team is, and what the needs are. If needed, I’m there and active. If a company is in my investment portfolio, then, yes, I’m always available to help grow it forward.
9. What do you look for in a startup as you evaluate it for a potential investment?Quite a few things, really, but they generally include:
- Innovativeness: does it have a unique product or business model that can be replicated
- Scalability: Is there ready market for the business and is it scalable? Is it potentially global?
- Team: What are the professional backgrounds of the founders and do they match the expertise required of the undertaking? Remember, an A team with a B product is better than B team with A product!
- Market size and growth-orientation: Is there a market for what you offer, and how well does the startup know its market? Is that market large or in high growth?
- Competition: What is the current and potential competition like, and what are the barriers to entry for any competitors?
- Business model: Is the startup clear on what it does, how and to for whom? The idea or direction may change, but clarity in approaching what to do, test or to try is key.
- Financial need: How much money the company is seeking and where it is intended to take the company?
- Clarity of direction: Is a path to an exit or ROI clear?
10. The entrepreneur/investor relationship is quite complex. What should an entrepreneur look for in an angel investor?There’s no one-size-fit-all investment relationship, so a startup should look for a good match for what their company needs. That generally includes
- Competence in your company’s business sector
- Networks in your company’s business sector
- Good chemistry with your founders and other investors
- Time and availability to work with your company
- Capital to participate in, lead, or follow on your subsequent investment round
Ari Korhonen at a glance