Similar to the previous five steps discussed in our reading, “Winning Angel, the 7 fundamentals of early stage investing (Amis and Stevenson),” the sixth step of supporting roles of the angel investor depends on how much time the individual investor wants to spend on the company. The decision of the supporting role of the investor looks like primarily lies in the hands of the investor. The startup dynamic will determine the amount of involvement an investor will need to spend on a day-to-day basis. If the entrepreneur and investor see eye to eye, there may not need to be much involvement. Additionally, if the investor feels that the management of the company is experienced and competent, they may not see the need to be involved as frequently. After all, more time will allow them to look for the next great deal. Although the authors of the book state some investors may have a completely hands-off approach to their investments, I have to believe the majority of investors would be heavily involved in the strategies and operations of the new startup. According to an unnamed contributor to entrepreneur.com, you should heed the following advice: “Prior to starting to look for your angel investor, you must ensure that you are at ease with permitting somebody who isn’t intimately familiar with you or your business to play a role in how it is run.” An investor’s role could potentially include decisions on pricing strategy, how to approach a customer, hiring, and firing employees. They could even fire the founder from the firm! The entrepreneur needs to be humble and go in with the understanding that they are trying to create a larger enterprise than what the entrepreneur could on their own.
I do not blame the investor for wanting to be involved in the business and making it a success. After all, there is a lot of money on the line. Expectations among investors are high. They typically will have multiple failing startups. However, one successful startup needs to have exponential growth to make up for the rest. According to Murray Newlands at startup grind.com, “It isn’t unusual for an angel investor to expect a rate of return that equals 10 times their original investment inside the first 5 – 7 years (2015).” The pressure for success is immense, and all parties want it to be successful.
In many cases, angel investors have a great deal of entrepreneurial experience. An entrepreneur should gladly take advantage of that fact. Not just anyone can be an angel investor. It takes accreditation from the Securities and Exchange Commission. They need to have a net worth of at least one million dollars and have an annual income of at least two hundred thousand dollars (entrepeneur.com). The chances are good that they have success in the investing world in the past and know what it takes to create incredible growth in a short period.
To create a good working relationship with the investor, I would have an open dialog. An honest relationship fosters excellent communication. Discussing ideas and using each other’s diverse backgrounds is the best way to succeed.
Amis, D. and Stevenson, H., (2001) Winning Angels the 7 fundamentals of early stage investing, Pearson Education Limited, ISBN 0 273 64916 7
Newlands, M. (2015), Pros and Cons of Using an Angel Investor to Fund a Startup, startupgrind.com, https://www.startupgrind.com/blog/pros-and-cons-of-using-an-angel-investor-to-fund-a-startup/, Retrieved on June 13, 2020
Getting Started with Angel Investing, entrepreneur.com, https://www.entrepreneur.com/article/52742, Retrieved on June 13, 2020
Master of Entrepreneurship Website for Mike Weimar 