Angel Investing by David S. Rose

Author:David S. Rose
Language: eng
Format: epub
ISBN: 9781118901212
Publisher: Wiley
Published: 2014-06-03T00:00:00+00:00

Given the asymmetry between the number of aspiring entrepreneurs and the number of active angel investors, in 9 out of 10 cases the lopsided nature of the dynamics favors the investor. Angels typically look at 20, 30, or 40 opportunities before selecting one. At the same time, startups may be reaching out to the same number of potential investors, hoping to find one willing to write a check. The relationship during the courting stage is much like that of a supplicant and an almoner. In practice, this means that following the golden rule of early-stage investing (“the person with the gold makes the rules”), the tenor of the meeting, as well as its outcome, are often determined by the investor.

Because you will be meeting with so many founders seeking funding and because word spreads very quickly within the entrepreneurial community (there are entire websites and mobile applications—even satirical games—devoted to entrepreneurs' reviews of investors), it is in your own best interest to be respectful of, and helpful to, every entrepreneur with whom you meet. This is true even (especially) for those in whose companies you decide not to invest. Many of the most prominent angel investors with high public profiles—something that helps them get directly approached with hot deals—got that way because of their proactive support for entrepreneurs.

During negotiations with a founder, and despite the number of subjects that need to be hammered out before an investment is made, there are two issues that probably account for 80 percent of contention during discussions. The first of these is valuation, and in Chapter 10 we covered the theory and practice of valuation setting. The second issue is that of control of the company: who has it, now and in the future.

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