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Talking to Graduate Students

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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.

Chicago had a dormant start up community back in 2007. Not only did we have to recruit willing writers of checks, but all of us had to get educated, and educate others on what role we needed to play. The community here is still in it’s infancy, just having gotten out of diapers. The good news is we survived the financial crisis. There are little start ups that I see here all the time that could become really nice sized companies.

There is a massive list of entrepreneurs that built the city of Chicago back in the late 1800's and early 1900's. The city of Chicago made the second most amount of physical goods during World War Two. Only Detroit outpaced Chicago in production. That’s impressive. There is no reason that it can’t be done here again in the Tech Era.

As I circulate throughout the midwest, I see a spark. Ann Arbor, Columbus, Indianapolis, South Bend, Chicago, Madison, Peoria, Minneapolis, St. Louis, Kansas City, Des Moines, and Omaha all have some focused efforts on entrepreneurship. Angel groups are active all throughout the midwest. Midwestern pioneering ingenuity you might say. Farmers know how to pull themselves up from their bootstraps. Entrepreneurship is all about bootstrapping.

The good news is I have met some really cool people both on the angel side and on the entrepreneurial side since I started. If you want to be energized, go have a few cocktails with a bunch of start up entrepreneurs. Ideas fly around like gnats in the woods. Laughter usually accompanies a lot of the conversation.

The bad news is that we still are in the foothills at the base of the mountain. There is a lot of education that needs to take place. There are a lot of attitudes we need to change in order to get the culture firing on all cylinders. But, at least we are pounding pitons into rock.

If you were speaking to graduate, or college age students, what would be the most important things you could tell them about what it is to be an angel and what entrepreneurship is?

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