What Every Angel Investor Wants You to Know by Brian Cohen

Author:Brian Cohen
Language: eng
Format: epub
Publisher: McGraw-Hill Education
Published: 2013-04-22T16:00:00+00:00

IT’S NOT EASY TO TURN DOWN MONEY

I know it’s tough for startups. It looks like a buyer’s market, and you often feel desperate to say yes to anyone who waves dollar bills in front of you. But desperation rarely leads to good outcomes. Angels never want to see your neediness. In fact, the more we are persuaded that you really don’t need our money, the more eager some of us are to give it to you.

You ever see the film Broadcast News? There’s a great line from the hapless TV anchor played by Albert Brooks, whose selfdoubt turns him into a flop-sweat basket case when he’s on air. He says, “Wouldn’t this be a great world if insecurity and desperation made us more attractive? If ‘needy’ were a turn-on?”

But it isn’t, not if you want your investors to put out.

Investor raising means setting up the conditions for a true partnership. The relationship between a founder and an angel is like a professional marriage. Like a marriage, the partners share assets. The investor owns a piece of your company. To the extent you envision your company as an extension of yourself, you are selling a portion of yourself to the investor, who will be your partner, for better or for worse, for richer or for poorer. Ideally, that’s what sharing equity means. You’re in it together for the long run.

You both hope the long run looks good. If the equity in the union grows, both parties get to share in the bounty. If it doesn’t, you both lose. It’s when things aren’t going so well that you really need each other, and you know that the angels will be there for you. Think about this. Can you see yourself figuratively being in bed with your investor for the next nine years? That’s the length of time before the average startup gets a liquidity event. And that’s why it’s important for you to decide what kind of partner you are willing to accept.

Investor raising is worth its weight in gold. “It’s true that money itself isn’t dumb or smart,” says Dan Kador, CTO of Keen IO. “The judgments attach to the investors behind the money.” It’s not a question of intelligence, he says, but the ability of investors to materially help advance the startup above and beyond the capital. “Although Keen IO has some investors who haven’t shown a desire to actively participate in the startup, they are people we can go to with specific questions and be blown away by the quality of their responses,” Kador says. Every Keen IO investor was selected on the basis of his or her unique ability to assist the startup in its growth and evolution. “That’s what we call smart money,” Kador says.

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