Tomorrow I am going to a pretty prestigious institution, Notre Dame, and I am going to talk to graduate students about angel investing. We will talk about much of what I write here. How angels are different than VC, where angels invest. I am sure we will get into the roles angels take when interacting with their companies. I generally don’t like to talk a lot during these things. I detest powerpoint presentations but know that sometimes they are a necessary evil. My favorite part is having a long question and answer period so that we can discuss and talk about the concerns and questions of the group.
As people like Brad Feld have painstakingly pointed out over and over, there are good angels and their are bad angels. Without specifying everything, I think bad angels are in it for them. They try to extract as much value as they can from the start up, and only exchange a check in return. Worse yet, some angels promise the world, don’t write a check, and try to extract value by providing “services”. Ugh.
When I began doing this whole angel gig, I learned a lot about how it had been done previously here. Angels took a fee for raising money. Or, they took precious extra equity in the company for raising money or creating a connection for the start up. Instead of acting like an angel, they acted like a mercenary broker.
Maybe those things seemed distasteful to me because I traded my own money in the commodity markets. I looked at the angel thing a bit differently. I was never a broker, so I didn’t have that mentality. Or, maybe it’s because my parents didn’t raise me with that moral compass. It just seemed odd that I got juice on top of the equity I was already receiving for the check I was writing.
There were enough hurdles to climb in the midwest. Angel investing wasn’t ingrained here. Because the political machine is so strong here, much of the Chicago mentality is to approach someone with your hand out. Transactional relationships can be common in some circles. While the angel relationship is transactional, it’s also very personal.
Angels not only act as money providers, but they act as mentors, counselors, and connectors. A lot of people implicitly get that, but there are plenty of others that assume you write a check and walk away. I like to say that when I write a check, the entrepreneur isn’t stuck in the middle of an ocean floating on a raft. I am on the raft with them. Sometimes you get seasick, sometimes the wind blows your way. Angels should never assume all they are doing is providing funds to the company.