In reading the section aptly named, supporting, in Winning Angels by David Amis and Howard Stevenson, I have come to understand yet another critical component of the 7 fundamentals of early stage investing. Supporting is just what you would deem it to be. Although the section delves into further aspects of support, at its foundation, it is how the angel investor will collaborate with the entrepreneur to ensure a successful venture. While some investors prefer to have more of a hands-on approach and assist with everything from early stage decisions to the hiring and subsequent firing of key positions, there are those who would rather supply the funds and simply sit back and wait on their return. Additionally, somewhere in the middle are the individuals who desire more of a coaching role to better facilitate the entrepreneur with the establishment and routine maintenance of the business. As Amis and Stevenson have noted, “angel investors follow participation roles that are a combination of the needs and wants of the entrepreneur, the company, and themselves.” After learning about the various functions that investors can play, I would rather have someone with more of a coaching responsibility to assist me in making decisions that can ultimately make or break the organization. Winning Angels notes, “the best two ways to figure out how to contribute are to ask the entrepreneur what they want and to do a lot of deals so you (the investor) know what they need.”
Further along in the supporting section, an excerpt is taken from David Berkus’ book Better than Money, where he remarks, “experience alone is a powerful but very inefficient teacher. She tends to give the test first, then teach the lessons later…It usually takes more than one bad break to bring down a business.” If investors and entrepreneurs are continually monitoring the progress or lack thereof, they can make strategic assumptions that can be used to analyze the sustainability of the organization. Amis and Stevenson observe that investors should, “schedule a meeting each month with the entrepreneurs, usually for a half-day or so. At this meeting, all aspects of the company are examined, plans are re-assessed and modified, and opportunities to support the entrepreneur are identified.” With this transparency, the business is better equipped to outlive many of the initial hurdles and continue its quest for success.
Despite the fact that entrepreneurs and investors alike will characteristically operate with the best intentions for the organization in mind, there is always the possibility of failure. Amis and Stevenson suggest, “entrepreneurs should handle their potential failure as they would any other potentiality in their business, that is professionally and with contingency plans. Handling failure right will maintain their reputations and many of the investor relationships.” With this methodology in mind, entrepreneurs can, “live to fight another day.” As David Berkus so eloquently puts it when he analogizes landing a plan to failing, essentially, he states, “the only thing to remember then is that any landing you can walk away from is a good landing, cause you’ll live to fly again tomorrow.”
Rest in Peace John Witherspoon
Amis, D., & Stevenson, H. H. (2001). Winning angels: The Seven Fundamentals of Early-Stage Investing.London: Financial Times Prentice Hall.
Berkus, D., & Kelley, B. (1994). Better than Money!: Resource Capital Concepts to Make Your Software Business Fly High! Santa Barbara, CA, CA: Synergy Communications Press.
K [Kyle]. (2012, May 18). Friday Gun Talk. https://www.youtube.com/watch?v=MFwz2ESjfBQ.