Tuesday, November 1, 2011

Invest in a Business You Can Influence

One of the main reasons an entrepreneur will be approaching you with their business plan and off you a stake in the business is to get you involved. This is especially true for early stage businesses and new entrepreneurs. These businesses want you to get involved. They are looking for your experience and contacts as well as your investment into the business. Angel investment is much less about investing your money and waiting for a high return and much more about getting involved.

Yes of course no entrepreneur wants you to interfere so drastically that they feel both intimidated and out of place in the own start-up. But getting involved with he right attitude can benefit both the business and of course you with your investment.

Investing in a company as an angel is an intimate affair. You commit only after a thorough due diligence process evaluating the potential success of the idea.  You evaluate the talent and drive of the founding team.  It’s about people, and the company comes to hold a special place in your heart.
Traditional investments like stocks?  They’re just a ticker symbol in a chart, affected by powers far-removed from your own.
Right?  Isn’t one of the best things about angel investing that you get to participate in how well your investment turns out?

It’s Not Just Your Money They Need. 

My ideal vision of an angel deal incorporates something much more than money.  Forget about being a “passive investor”.  That’s just as boring as a mutual fund.

When you put your money into a company, hopefully it’s partly because you feel it can benefit from your experiences in business.  So you’ve grown 2 online companies through strong search marketing and sold them?  That’s awesome, and you should be finding companies that can benefit from that experience.

Of course you’re not necessarily going to come in and be the CMO.  But the 1 email per week you can give your entrepreneur could be worth R1 000,000 to the bottom line.  The one answer per week that you can provide about a tough marketing decision could make all the difference in the world.

Go With What You Know

It’s only natural for people to be drawn to things they understand.  In angel investing, that means you’ll likely gravitate towards companies that mirror your own past experiences.

That’s a good thing!  Take your money and your advice to places where it’s mostly likely to be useful.  I’m not about to invest in a pharmaceutical manufacturer, but I’ll jump all over sleepapnea.com.

Remember – You Can Contribute

The “passive” angel investor annoys me, especially if he/she bemoans the poor performance of their investments.  If it’s your Energizer stock, that’s one thing.  If it’s the R50,000 you put in 2 angel deals in 2008, well do something about it. I’m sure your entrepreneurs are open to ideas, help, connections, and insights.  Getting your hands dirty an only be a good thing.

Make sure that you get involved with the type of personality that will enjoy getting you involved. someone who is not protective over their own business plan to such a level that they are not open to learning and benefiting from others ideas.

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