Early Stage Investing- Supporting
Week 7: Supporting
In reading Winning Angels: the 7 Fundamentals of Early Stage Investingby David Amis and Howard Stevenson, the ways of supporting is discussed. As someone who is not familiar with how angel investing works, I would think that money is the “support” and then that is the only role the investor plays, but, this chapter describes all the various ways an investor can support a business. Like my original thought, loaning money can be the only thing an angel investor does; this is called a silent investor. Other supporting roles include reserve force, team member (full or part time), coach, controlling investor, and lead investor. As someone who could possibly take on capital, I would think I would want someone who is a coach. I would want to be able to pick their brains and learn from their own experiences. I also particularly like that they stay on the sidelines. If you have brought your business to where it is, you also should keep the reins if you want it and continue leading your team. It’s important for the team to trust their leader and bringing in another strong-minded leader might throw off the team dynamic. By having a coach, you still get the valuable input but still get final say.
The investor type I would want least would be controlling investor. As an entrepreneur it is hard to imagine someone coming in and taking over what you have poured your heart into for how many years. I definitely respect a new point of view and would hope to have this to continue to grow but losing complete control of your company is a tough thought for me unless I was looking to sell. I can see some instances where the entrepreneur would need to step out but wouldn’t want to completely sell out such as an illness, old age, or family matters but this is definitely a road that would be a tough one to watch especially if the new investor is not going to go in the same direction.
After reading this and all of the other chapters, a reoccurring thought of mine is when do you seek investment? Is angel investment right for everyone at some point? When reading this, I find it hard to connect to because I am still unsure of what happens before this point. I do remember from the readings that an angel investor is looking for something under $5m, but is this right for the entrepreneur as well and how do you know what kind of support is right for you at your stage in the game?
I really appreciate the thought of an angel investor who actually wants to be part of the process. To me, this seems like they will be more emotionally invested and want the “win” as much as the entrepreneur. I personally would like the hands-on approach of support and wonder how my view of this will change as I get closer to the need of investment for my own company.
References: Amis, David, and Howard H. Stevenson. Winning Angels: The 7 Fundamentals of Early-Stage Investing. Financial Times Prentice Hall, 2001.