[VICTOR V. BUBUIOC] Winning Angels: Insight Into Entrepreneurial Financing: Part 6: Supporting

[BUBUIOC INC.]

“Experience alone is a powerful but very inefficient teacher. She tends to give the test first, then teach the lessons later.” -David Berkus

Mr. Berkus continues by saying that “experience, used as a resource at just the right time, can be, and often is “Better than Money”. And someone else’s experience can sometimes provide a much better lesson (before you are tested) than your own inexperience (after failing first)” (Amis & Stevenson, p. 280)

In the book Winning Angels, the authors describe five methods by which investors choose to support the entrepreneur and his/her venture. The five roles are:

§   Silent Investor: no active role simply signs the check.

§   Reserve Force: provide available skills when called upon.
§   Team Member: works in a functional are of the venture.
§   Coach: Highest impact with limited control
§   Controlling Investor: Becomes the entrepreneur, high impact.

The Lead Investor is yet another important factor that can determine the likelihood of success. The lead investor is a hybrid, with a style similar to those of the controlling and coaching investors. The lead investor is essential because he/she will be the bridge to other investors. Oftentimes investors make their decision to or not to invest based on who is already on the team. The presumption is that a high caliber investor is already on the team, it means they did the legwork: “entrepreneurs quickly learn that despite their intelligence, experience and good sense, many angels will act like sheep when it comes to early stage investing, with everyone following each other.” (Amis & Stevenson, p. 252) This concept is rather intuitive, and makes sense. It is a “follow the crowd” mentality that many of us participate in rather often.

When deciding the best means and approach to supporting the entrepreneur/venture, investors should focus on achieving “value events”. These are key elements needed for achieving success. According to Tom Warthon: “The best way to think about managing your contribution to a start-up is to focus on attainment of value events. Value Events represent both real and perceived value. Above, we mentioned how the lead investor represents perceived value to other potential investors and thus helps attract them. There are many avenues by which investors can provide value to the venture. These include marketing, financial, operational, organizational, and much more. The best way to achieve “value events” is to ask the entrepreneur what is needed. This method ensures that there are no conflicts and eliminates redundancies.

The most prolific investors see helping as their primary role. They provide active support at the strategic level. They know that usually “everything cost twice as much, and takes twice as long”. Naturally they are prepared for the likelihood of 2x rule. The winners take charge. They “own” the startup. This helps keep a close eye on the venture, entrepreneur, and hopefully a win. The winners understand the importance of a symbiotic relationship. They find ways to nurture this relationship and time to make things happen. 

For more on this topics please see:

Winning Angels: Insight Into Entrepreneurial Financing: Part1: Sourcing

Winning Angels: Insight Into Entrepreneurial Financing: Part2: Evaluating

Winning Angels: Insight Into Entrepreneurial Financing: Part3: Valuing

Winning Angels: Insight Into Entrepreneurial Financing: Part4: Structuring

Winning Angels: Insight Into Entrepreneurial Financing: Part5: Negotiating

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Posted By BUBUIOC INC. to VICTOR V. BUBUIOC at 6/27/2013 04:08:00 PM