FinTech is a highly regulated industry, especially in countries with multiple financial regulators like Saudi Arabia. For example, SAMA regulates payments, crowdfunding debt for SMEs, P2P lending, and more; the CMA oversees Robo Advisory, Sukuk, fund distribution, and other financial activities; and the Insurance Authority (IA) handles Insurtech.

Navigating all these regulations and dealing with different regulators as an angel investor to get better deals is difficult. It requires more learning and experience than relying on gut feelings.

Angel investors are among the biggest believers in the world of startups in general. And when we talk about angel investors in FinTech, we're referring to the early stages of startup investing, such as Pre-Seed, Seed, Pre-Series A, and, to a lesser extent, Series A. In Series A, as the round size and minimum ticket size increase, you typically see VCs getting involved, while angel investors often step back.

According to FinArabia's FinTech Report for KSA in 2023, there was SR523 million in investments in early-stage FinTech startups, ranging from Pre-Seed to Series A. This represented 78% of all FinTech investment rounds in 2023. Angel investors are very active, highlighting their importance to the FinTech industry.

What do angel investors look for in a startup?

Experienced investors understand that out of 10 startups they invest in, only one is likely to be successful, while the other nine may fail. However, the one that succeeds can cover the losses of the failed investments and generate a profit. Thus, angel investors are always hunting for those outlier startups.

Typically, each angel investor has their own investment thesis. For example, 'Investor X invests in three startups per year in FinTech in KSA'—with the industry, number of deals per year, and geography already defined. Angel investors often look for a solid team, ideally with at least two co-founders—one focused on business and the other on technology. They prefer full-time commitment over part-time involvement and often favor certain sectors for various reasons. Additionally, they seek businesses with large market potential.

Angel investors also look for startups that have obtained in-principle approval from SAMA or CMA, as this demonstrates the entrepreneurs’ commitment to the startup and increases the chances of success. Angel investors often find the best deals through events, angel investor networks, or by participating in syndicates that manage the best deals on their behalf, sometimes lowering the minimum investment size for them.

What does a startup want from an angel investor?

Angel investors in FinTech come in different forms, offering various types of help and assistance. For co-founders, it’s important to remember that it's not just about the money. In some cases, the investor's network or expertise can be more valuable to a startup than financial support alone. Some investors may join the startup as advisors or board members, while others will roll up their sleeves and help guide the startup in the right direction. If you're fortunate enough to choose, prioritize expertise and network over pure financial infusion.

Finding the right startups or the right angel investors is not an easy task. It requires practice, exposure, dedication, and consistency throughout the search journey. In the world of angel investing, you'll encounter both good and bad entrepreneurs and investors, and this will shape your learning curve toward becoming a better investor. Similarly, for entrepreneurs raising funds in the early stages, you'll meet serious investors as well as people who claim to be angel investors. This process will also help you build your learning curve. Remember, investors come in different forms, so make sure to choose the right ones.