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Angel Investing in Palestine

By Laith Kassis and Brigitte Baumann

TV shows such as Shark Tank, Dragons’ Den, in which entrepreneurs pitch their businesses to a panel of potential investors, have helped popularize the concept of angel investing. Business angels are individuals who support startups to grow by providing cash, guidance, and contacts. In exchange, the investor becomes a shareholder in the startup. Historically, angel investors were limited to “exited” entrepreneurs (those who had successfully sold their businesses), high-net-worth individuals of whom more than 95 percent were men. During the past 20 years, angel investing has been “democratized,” becoming accessible to a broader range and younger set of individuals, including those working in the tech industry, middle managers, and professionals such as consultants, accountants, and lawyers. Women also have begun to serve as business angels.
Angel investments in 2021 in the United States totaled US$29.1 billion, 15.2 percent more than in 2020.*1 The year 2022 has seen a decrease compared to 2021, but the role of angel investors and the funds they bring continue to be significant.*2 The deal sizes, the number of deals, and the number of angel investors have also increased year-over-year. Individual angel investors usually invest between US$5,000 and US$200,000 in each round. A standard angel funding round for a startup consists of seeking to raise US$100,000 to US$1,000,000 from four to twenty angels. The individual amounts of money invested do not have to be large if a group of angel investors syndicate together.

Investing in startups is inherently risky, and angel investors should have an understanding of how to manage risk and mitigate potential losses. Becoming an angel investor requires a certain level of knowledge and expertise in the field of startup investing, and investors should be able to conduct thorough due diligence on startups to assess their potential for success.

Becoming an angel investor presents a unique opportunity to support innovation and economic development in Palestine while also potentially earning angels a significant return on investment. Angel investment offers substantial room for growth and the potential for high returns but is also very high risk. Out of ten investments only one or two will succeed. However, many Palestinian startups such as Userpilot, weDeliver, Gamiphy, and Mashvisor have gained recognition in the global market. These successful startups are evidence of the potential for Palestinian startups to succeed in the global market. The timing has never been better to start an angel investment journey now.
But who’s to say that Palestinian angel investors should limit their investment into Palestinian startups coming from the West Bank or Gaza? They can stretch their boundaries and look towards investing in Palestinian startup founders in 1948 Palestine and the diaspora. They can also increase their appetite as angel investors and syndicate with other angels. They can even invest in non-Palestinian startups to diversify their investment portfolios. Angel investing provides diversification benefits for investors who look to spread their risk across a variety of asset classes.

Other than the potential for high returns that may be higher than traditional investment options, angel investing provides an opportunity to support innovative startups and help bring new products and services to market, thereby contributing to the growth and development of the startup ecosystem. Successful angel investors report that they (i) join an angel network to access good investment opportunities and benefit from other members’ insights and experience; (ii) take a portfolio approach and frequently start with small investment amounts/tickets via syndicates; (iii) keep funds for future/follow-on rounds; (iv) continuously learn, access best practices, and review/refine their investment strategy; and (v) take angel investing seriously as an asset class and have fun with their engagement.*3
Several initiatives are under way to launch angel investor networks in Palestine. One initiative to support these networks is the Program for Angel Investor Development (PAID), which is a part of the Innovative Private Sector Development project (IPSD),*4 a Ministry of National Economy project funded by the World Bank and implemented by Development Alternatives Incorporated. PAID is delivered in partnership with Efino, an initiative that offers prospective and experienced business angels angel-investing awareness sessions and webinars on topics such as investment strategy, due diligence, company valuation, deal terms, and investment and portfolio management and exit procedures. Those who are interested can register for the investor learning tracks via PAID.*5Becoming an angel investor requires a certain level of knowledge and expertise in the field of startup investing. Some key areas of knowledge that are important for aspiring angel investors include a deep understanding of the startup ecosystem and its dynamics, including how startups are formed, how they are funded, and how they operate; and being able to analyze a startup’s financials and projections to determine its potential for success. It can be helpful for angel investors to have expertise in a particular industry, as this can provide insights into market trends and the competitive landscape. Furthermore, angel investors should be able to conduct thorough due diligence on startups to assess their potential for success. This includes evaluating the team, market size and competition, intellectual property, and regulatory issues, among other factors.

*1 “The Angel Market in 2021: Metrics Indicate Strong Market,” Center for Venture Research, available at https://paulcollege.unh.edu/sites/default/files/resource/files/fy_2021_analysis_report_final.pdf.

*2 “How Angel Investing Is Funding the Future One Great Idea at a Time,” Emeritus, January 11, 2023, available at https://emeritus.org/blog/finance-angel-investing-program/

*3 “The GoBeyond Investor Report: Angel investing Strategies and Portfolio Returns,” GoBeyond, April 2019, available at GoBeyond Investor Report 2019.

*4 Developing a Dynamic Startup Finance System,” Innovative Private Sector Development, available at https://www.ipsd.ps/project-components/26.html.

*5 Registration is available at https://docs.google.com/forms/d/e/1FAIpQLSeZAYqZcLjyRvRlcMOZ0iX0lvBBENMlGjnf-OSVNZRWozgo9w/viewform.

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Authors

  • Laith Kassis is the co-founder of EnterVentures consultancy and has been a pioneer in the development of the Palestinian startup ecosystem. His experience includes managing incubation programs, technoparks and innovation hubs that have invested in several Palestinian startups.

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  • Brigitte Baumann is the founder of Efino and GoBeyond, fintech companies that have transformed angel investing into a new scalable asset class for small and large as well as novice to experienced investors. She has been a business angel since 2003 and was honored as the European Angel Investor of the Year 2015, and one of the top three Female Business Angels in Europe in 2020.

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