Angel Investor: I have become that which I loathed

Posted: July 9th, 2015 | Author: | Filed under: Startups | 5 Comments »

In Chapter 16 of my book I talk a lot about angel investing. First up: “Angel investor” is a stupid and meaningless term, right up there with “stock market investor” or “bank account holder”. It means someone did something, once. It means nothing more.

Angel investors have little in common, and range from occasional dilettantes who throw a kilobuck at their former college roommate’s sure-fire app idea, to career investors who’ve made fortunes placing thoughtful bets on startups, to lecherous “service providers” who lure in unsuspecting companies with promises of “investment” only to add conditions and caveats. Classic nonsense propositions include that you pay them a percentage of any investment funds they raise (simultaneously a terrible idea and illegal) or that they “invest” with advice instead of cash.  My personal favorite was the “advisor” who offered to help fundraise in exchange for a large equity grant and a five-digit travel allowance. Monthly.

In any case, now I’m counted amongst the shadows. Since selling Sparkbuy to Google I started putting a few dollars here and there into startups. And I’m sad to say that I’m now one of those terrible angel investors who drove me nuts when I was first starting to raise money. Truly, you don’t want me on your investor rolls. Here’s why.

I don’t want to be an angel investor. I laugh heartily when I get emails like “do you want to increase your deal flow?” or “I think you’ll be really excited about this investment opportunity.”  My investment strategy is to try and avoid investing in startups. I don’t look for deals; I actively try to avoid them. I will find any excuse I can to beg out of investing, but as with many things, I’m terrible at this, and sometimes fail and accidentally invest anyway.  But even then…

I don’t invest enough to make it worth the hassle of having another investor. My preferred check size is $10k. I’m like the guy who goes to the fancy restaurant and orders an appetizer, then fills up on the free bread. $10k is pathetic and puny enough that most smart companies will turn up their nose at me. In fact, I advise most companies that I consider investing in that they probably shouldn’t take my money because it’s not worth the incremental headache to put a small investor like me on the rolls.

I’m almost certainly going to say no. I’ve got my own startup now, and it’s basically the coolest thing I’ve ever worked on (a 3D laser printer that makes amazing and beautiful things at the push of a button… shameless plug, we’re hiring), so I’m putting my time and resources in to that. I don’t have time to take the meeting, do diligence, fill out paperwork, sit on hold for 30 minutes with my stupid bank trying to remember the street I lived on in fourth grade so they can approve the wire, and all that other nonsense. Which means…

I’m intensely, terribly lazy. After all my trying to avoid investing, I generally fail in just a few cases – when the CEO is a friend, when I know the company well via some pre-existing coincidence, AND when there are already A++ investors who I know and trust involved. Because then I can count on them to do all the hard work, and just write my puny little check to go alongside. Because…

I’m not going to call you. I’m not going to check on my investment, or offer to drop by, or otherwise do much at all. I’ll take your calls, and help when you ask. If you’re curious, I usually pitch in pretty heavily around CEO stuff, particularly cofounder strife, fundraising, and selling the company. But I mostly just get involved if you call; you’re going to have roughly zero percent of my standing brain time. Unless you request otherwise, the only time you’ll hear from me* is when…

I will lose my share certificates when you sell the company. Sorry, karma sucks. Every damn one of my investors (who asked to keep their share certificates) lost theirs, and I’m so careless I’m almost certain to do the same. So, pro tip: tell your lawyers to keep the share certificates for your angel investors on their behalf. It will save you a lot of misery and paperwork.

So don’t have me as an angel investor. I’m just not worth the hassle.

* One exception: at any given time I’ll be closely involved with ~3 startups. I may be on the board or just a formal advisor. I do my best to stay current with those companies, scout opportunities for them (press/hiring/fundraising/etc), meet as often as is helpful, give lots of advice that basically consists of me repeating crap that’s in my book, etc. I’m not very good at it, though, so this is a really rotten deal, particularly now that I’m busy with my own company. So while you don’t want me as an angel investor, you really really don’t want me as a board member/advisor (although I do have one “slot” open since Kate sold Popforms, entirely because she is awesome and no thanks to me). Basically I’m too expensive and not very helpful. You’ve been warned.

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  • Yinka!

    Ugh @ “lecherous “service providers” – the most irritating aspect is potential time wasted engaging with them, given that many masquerade as investors. If you don’t ask key questions upfront, the disguise isn’t revealed until later.

    BTW, when is Glowforge dropping and will it perchance include functionality like stitching? Noticed leather shaping and fabric trimming listed under capabilities and saw the finished leather good displayed among examples.

  • Agreed. And unfortunately they tend to prey on the most inexperienced coimpanies who can least afford to give up cash and equity for advice that’s dubious at best.

    Glowforge is scheduled for December – when doing leatherwork, you can cut the holes (with thousandth-inch precision) so even a dolt like me can make beautiful stitchwork; you just lace it up like a shoe. If you’re handy with a sewing machine, then you have whole new vistas open up with fabric etc.

  • Sandi Lin

    I knew helping you cut game pieces and ship 24 tons of cardboard was going to pay off…

  • Ah, memories! And who thought that laser monstrosity was going to turn in to its own company.

  • Una King

    Yes, however you book “Hot Seat, The Startup CEO Guidebook” was like a giant, clasping hand reaching down to me in the roiling ocean, and hoisting me up into the lifeboat. God Bless you for that. I no longer walk alone, and am breathing a sigh of relief aboard the lifeboat you felt like launching to catch those of us who where helplessly adrift.
    Thank you so much for your guidance.