ENT 640: Winning Angels: The 7 Fundamentals of Early-Stage Investing

ENT 640 Week 7: Supporting

ENT 640 Week 7: Supporting

Angel investors are very useful beyond money, they provide years of wisdom of seeing start-up companies win and fail. Most angel investors have either started or helped start companies in the past, as well as having invested in many start-ups. So they know what to look for and what you should be doing if you aren’t. There are five participation roles that the investor takes on, those include:

  1. Silent investor
    1. Financial investor with no interest in having any control
    2. Make three referrals
  2. Reserve Force
    1. Ready to help the entrepreneur with anything
    2. Advisor/supporter/Introducer
  3. Team Member (Full or part time)
    1. Works in the company, operational role
    2. Could have negative impact due to micro managing
  4. Coach
    1. Mentor/supporter/advisor
    2. Daily advisor
  5. Controlling investor
    1. CEO/Chairman
    2. High activity/power

Advisors and virtual CEOs support entrepreneurs by:

  1. Strategic planning
  2. Positioning and marketing
  3. Business plan and revenue model development
  4. Developing investor presentation materials
  5. Introducing the company to investors
  6. Implementation and operational practices
  7. The development of the PPM, option plans, and other legal documents
  8. Business negotiations and strategy

There are four types of start-ups, many companies are a combination of two types or more.

  1. Product business
    1. Defining the product
    2. Building the first prototype
    3. First sale
    4. Professional managers
    5. Scale production
  2. Service business
    1. Service concept
    2. Raising first round of capital
    3. Initiating operations
    4. Demonstrable marketing event
    5. Raining value capital or attaining positive cash flow
    6. Hiring a professional management team
  3. Retail Business
    1. Retail concept
    2. Management team
    3. Raising first round of capital
    4. Identify property
    5. Store launch
    6. Second store launch
    7. Expansion team
  4. E-business
    1. E-business concept
    2. Build site
    3. Hire team
    4. Strategic partners
    5. Raise marketing capital
    6. Attain critical mass

Angel investors also bring experiential assets to the table, these assets can are based on things they have done before and that will contribute to your company. Experiential assets can be a combination of industry, functionally, network, angel experience and entrepreneur experience. Most investors wait and see and don’t usually help, but they demand changes and support where they see they have the ability to help. Most winning angels give active support and put emphasis on the entrepreneur as a businessperson during evaluation. Winning angels also know that investments usually end up costing twice as much as expected and taking twice as long. They develop a good relationship with the entrepreneur through structuring, and they make sure to build the right team for the start-up to grow and succeed. “Start with the right team, have plenty of capital, and never give up. (pg.272)” Winning angels succeed by preparing for later stages, have monthly financial statements and updates including a monthly one-pager and monthly meetings, be a motivator, help find advisors and bring in VC relationships.

Tools and tactics that winning angels use in supporting include, having a monthly meeting in support of the entrepreneur. Another tactic is called the three hurdles management which involves helping the entrepreneur achieve three hurdles of the first prototype, the first sale, and the first outside capital. Have the entrepreneur complete a monthly report with updates for the investor. And have a strategic investor partner, “Having such a partner can make a major impact not only on the operations of the business but also on its ability to gain recognition in the marketplace and raise more capital. (pg. 275)”

References:

Amis, David, and Howard H. Stevenson. “Supporting.” Winning Angels: The Seven Fundamentals of Early-stage Investing. London: Financial Times Prentice Hall, 2001. N. pag. Print.

 

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One thought on “ENT 640 Week 7: Supporting

  1. I can vouch for the statement that things take at least twice as long as you expect them to. There seems to be an inherent optimism when thinking about the amount of work and the speed in which it can be done. Maybe part of that is trying to paint a rosy picture on the part of the entrepreneur, but trying to be too ambitious really heightens the risk of missing those deadlines. That was one thing I found “wise” about the advice dispensed in this book.

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