Angel Investor Guidelines
Some insights for Founders on what Angels look for –
- Do Business with someone you like. Life is too short and sooner or later there will be trouble and trouble is no fun with the wrong person.
- Always protect the downside. Keep all costs as variable as possible. Never spend one penny on anything that doesn’t contribute immediately to the success of the business.
- Go in knowing it will take twice as much money as anticipated and have a good idea where that money is going to come from. Plus, make sure you don’t get hurt or diluted with the first moment of truth.
- Take no short cuts around financial management, knowing your costs, cash flows, and monthly variances. Be on top of the operating metrics or the business will run away on you.
- Always be generous if things are going well but be ruthless if they are not. It is very important to have a good understanding there are clear expectations of behavior and performance. And if things don’t improve, there will be changes.
- Never make a decision based on money already invested – it is gone. Make all decisions on the plan going forward.
- Insist on regular weekly reporting around Key Result Areas of the Business. You can’t measure a week if you don’t know what you wanted to accomplish. Being busy doesn’t count.
- As an Angel or an Angel Group, sell your investment the minute you can’t add value to it. You can’t demand performance if your only contribution is money. On the other hand never meddle unnecessarily.
- Never stray from what interests you. There is nothing worse than an essentially bored investing partner.
- Give yourself five years to be a market leader. If you ever go more than one year losing market share sell the business since you don’t have what it takes.
Since business is about people, and Angel investing is about helping people realize their dreams, here are additional insights for entrepreneurs with limited business experience –
- If you have a passion, go learn about it at somebody else’s expense before you start your own business.
- There is no substitute for real business experience. When you are getting that experience, don’t worry about the job you are doing, worry about the quality of the company you are working for. Learn from the very best.
- You can’t do it all yourself. Assemble an inside team to run your business. Have an outside team to advise you on finance, accounting, legalities and market research.
- If you can possibly avoid it, don’t seek government money. It distorts the equation and you can spend more time on grantsmanship than your own business.
- You must do a business plan. The absolute key to business is the ability to predict. And raise twice as much money as you think you need.
- Realize that if you are not prepared to eat, drink and sleep the business for the first five years, you probably won’t make it. It is the price you have to pay and it can be a high one. Sometimes it isn’t worth the price.
- The minute your business is big enough to hire a Manager, hire one. A true entrepreneur is a Leader, not a Manager. Eventually people want the tranquility of management, not the chaos of entrepreneurs.
- If your business plan needs to include a comprehensive view of changing technologies and the impact on your business. And if you don’t, chances are you will be sideswiped by a competitor who does have a technology plan.
- Think about the values you hold as a leader. Understand that you will be judged every day by your stakeholders. It is best to know who you are before you risk your investment, not after. Your investors, suppliers, associates, and Customers want to know who you are and what you stand for. In the end, it is the most important currency you will have.
- Once you have decided to get in the game, be fearless. You will be hit with any number of problems, impossibilities, disappointments and shocks. Realize it’s normal to be disappointed, shocked, stunned, thrown off guard, etc. (ie: big sale falls through, bank manager withdraws line of credit, Internet virus wipes out customer list, landlord pressures)Don’t waste time worrying about it – except to learn from the experience and how to anticipate better in the future.
- If you lose your sense of humor or you wake up one day asking yourself why you are doing this, sell or quit immediately. There is nothing more soul-destroying than being trapped in a business you no longer enjoy or believe in. Why do it?