ENT640 Supporting Blog Week 7
In order to be a better angel, you must be an entrepreneur. In order to become a better entrepreneur, you must be an angel (247). Winning angels support start-ups by focusing on value events. Value events are events that have fundamental impacts on the value of the business and its likelihood of success. “…the entrepreneurial/angel relationship can be as complex as any other significant human relationship.” (248). This relationship is significant because you’re investing a lot of money with someone at a high risk.
The 5 fundamental participation roles of angels:
1. The silent investor- Only signs papers. Doesn’t take an active interest in the company unless there comes opportunities to create a greater impact (249).
2. Reserve Force- Almost like being on standby. They are there for the entrepreneur and they are ready and willing to help them (249).
3. Team Member (Full or part time)- Works in the company on specific projects. Be careful that the risk of this doesn’t turn into micro-managing.
4. Coach- The highest impact investor that does NOT control the company. They meet with the entrepreneur regularly offering assistance and advice (250).
5. Lead Investors- They have a significant impact on fundraising and encourage other lead investors to join in.
a. Expectations of a Lead Investor:
· Willingness to help the company raise additional capital through their network and see that investment terms are beneficial to the follow-on investors and productive for the company.
· 5-10 hours per week availability.
· Acceptance and acknowledgment of lead investor role until VC is raised (253).
Value Events- “A value event is essentially anything that brings a heightened level of excitement.” -Tom Wharton (254). It represents a significant increase in the real or perceived value of the company. The likelihood of success has increased significantly also. “What would have to happen for you to invest in this company in the next round?” (254).
Here are some examples of value events:
· Marketing- Repeated sales or establishing a repetitive sales process.
· Financial- Discovering the size of the hole, raising an additional angel round, or securing debt financing.
· Organizational- Hiring professional managers or setting up an advisory board
· Operational- Implementing the service and attaining verifiable per-unit profit margins.
· Production- Building the 1st prototype and completing the first production run.
· Strategic- Gaining a strategic investor and partner. Identifying potential buyers
· Other- Proving the model and concept. Creating foundation for growth (255).
Each business needs to as these questions determining the value events for a company:
· What is needed to raise more capital?
· Who is the most likely buyer and what do they want to see?
· What will allow us to create positive cash flow?
· How are out competitors valued? (256).
4 types of Start-Ups:
1. Product Business- Making and selling a product.
2. Service Business- Providing a service. Geico Auto Insurance is an example of a service.
3. Retail Business- Selling someone else’s products.
4. E-Business- Using the internet to create your business (257).
Angel Investors need to understand that being an angel is about wanting to be involved in new businesses, working with young entrepreneurs, and giving something back to their community (265).
5 experiential assets:
4. Angel experience
5. Entrepreneur experience
Angels have replaced word monitoring with “supporting” (268). This is because angels think of themselves as a part of the team and basically, cheerleaders. Depending on the angel, some are more involved than others. It’s a personal preference. “The role I prefer to have changes over the time. The younger the company the broader my role. I am a strategy consultant and I’m eager to be involved.” -Tony Morris (276).
“Raising capital, giving strategic advice, counseling management, and ensure that the company fulfills its duties to shareholders are all normal roles for board members.” (269).
The more boards you go on, the busier you get. Angel Tony Morris doesn’t go on the board of directors for more than four companies at a time because he believes any more than that would limit his freedom (270).
Brian Horey said, “Generally speaking, I try not to be involved. I am completely passive, but on the other hand I do not have enough time to be serving a highly active role, so I am somewhere in the middle.” (276).
If you think you’re going to fail, this is how you fail:
· Be honest, even when it hurts.
· Observe all the laws.
· Save all the value that you can.
· Shut down early if possible.
· Do not leave a legal mess. (280).
“Recognize that failure is part of the game. Be frank, positive and do your best, it’s the only thing any angel investor can expect.” (281).
Tom Wharton, a founder of DoubleClik.com said,
“1. I never assume management has the answer. Instead I assume they don’t know what questions to ask.
2. I always tell them what I think they are doing wrong and how I believe to do it right, and I offer business insights like never like never burn bridges or throw away relationships that appear of no value.
3. I introduce them to anyone I know that could potentially bring value or know someone that could.
4. I complement them to death on their successes. They need to feel good about their hard work!” (283).
Amis, David, and H. H. Stevenson. Winning Angels: The Seven Fundamentals of Early-stage Investing. London: Pearson Education, 2001.