I’m an entrepreneur turned Angel investor. I started, nurtured, led and sold four successful companies. I’m past the point where I want to go for number five—at least for now. But I need to stay active; I need that thrill of watching something grow from idea to commerce. I’m a capitalist, yes, but the entrepreneurial aspect of capitalism is what gets me out of bed every morning.
All of this means, of course, that I could run the risk of being a pain in the ass to some younger entrepreneur by simply forgetting that I’m no longer in the pilot’s seat. Fortunately for me and the startups I invest in, I never forget that. And, after a couple of years of successful Angel investing, I’ve come up with a few pointers that might head off a few headaches for entrepreneurs seeking Angel assistance:
Good Angels Aren’t Simply Cash
Money is not the only thing you can gain from an Angel investor. In fact, it may prove to be the second or third most important thing if you approach it right.
Angels come in many stripes, but I think some of the best ones are of the ‘been there, loved that’ variety. People who, like me, have sweated getting funding and finding talent, who’ve lain awake at night figuring out how to make payroll without ever once thinking about how much better it would be to just receive a great salary somewhere.
You and the Angel can and should share basic motivators. As is the case in a friendship, a partnership, or marriage, shared fundamentals are the keys to mutual success. Partner up, if you can, with an Angel whose history is one you hope to mirror as you move your startup forward.
Actually, Angels Shouldn’t Be Only Cash
I’m personally leery of Angels who got into investing because they’re of high worth and see startup investments as the means to potential home runs. I have news for people who want to get into Angel investing only for the money, in fact: go to Vegas instead. The odds are higher and value-add isn’t required.
Because Angel investing, done properly, is an investment of brains as well as money.
Having said that, Angels need perspective…
As an early-stage company’s CEO, you understandably don’t want an Angel acting like he’s running any part of the show or being hands-on all the time. When young entrepreneurs feel investors are trying to steal their companies, this is partly where it comes from: accepting someone’s investment and finding him practically sitting in your chair when you walk into your office.
While that’s not what you want in an Angel, what you need is an Angel who can provide coaching and connections to help you navigate your own way through meeting basic needs—hiring and managing people, getting a good accountant, good legal counsel, or good whatever. That help alone can be equivalent in value to money.
The Angel Should Be Your Co-pilot
What can greatly exceed the value of money is an Angel who answers the phone when the going gets tough. I look back on my own startup efforts and see plenty of points at which I could have used a been-there, loved-that Angel I could call and ask: “What the hell do I do now?” I might have lost a little less blood and avoided a few battle scars.
…but not the biggest check.
It’s important for an Angel to not be the biggest check in the deal, because you’ll find yourself never wanting to talk with the biggest check unless things are going really well. You want that Angel to have skin in the game, but not too much skin. When you’re in a really tight spot and need to talk, you need to feel like you’re not about to risk alarming your biggest investor.
Young entrepreneurs inevitably run into puzzling problems and need someone with that right amount of skin in the game helping out. Starting a company, for the first time especially, is like learning to master a bicycle. You keep falling off, and one very important point is not to keep falling off. Having someone there who’s already gone through what you’re going through can work wonders at not just keeping you on that bike, but helping you use it effectively to get you where you wanted to go in the first place.
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Jim Eckstein is a co-founder and principal of The Angel Advisors, a board-level advisory group providing sound counsel to grow the value of businesses and fulfill owners’ entrepreneurial purposes. He specializes in executive leadership development, long-term capitalization strategies, strategic planning, Angel investments and exit strategies. He can be reached at firstname.lastname@example.org.