The advantage of the experienced angular investor in the considered industry
The other day I was talking to a small businessman who had some family and friends with a little money. His new idea and invention for his next company is relatively solid, but it’s a disruptive technology. He also has a friend who is an angel investor and some friends who are venture capitalists, so we have sources of capital to make this work. He wonders which group he should borrow the money from because he can’t seem to go to a local bank and get the money he needs to build his business. Okay, so let’s talk and let me explain the scenario here.
The angel investor has a bit of industry experience, but my entrepreneur friend is going to be a disruptive tech and may not sit well with many of the people in the Industry Association. However, this potential angel investor has an incredible amount of knowledge and background and could help break into the industry, and has many contacts of potential vendors and potential corporate partners as clients. The angel investor not only wants to sit on the sidelines, they would also like to use his experience and help build the company.
In other words, my entrepreneurial friend will get free mentoring, consulting, and coaching services along with the investment. In many ways, if you were to hire that level of expertise, it would cost you a pretty penny, but in this case, you basically get a free partner, someone to go to and help you get over the hump. Perhaps the question is; Will this angel investor hold you back in the market or help you succeed? The reason I ask that is because the angel can be used to do things the old way, not the new way. Still, the entrepreneur needs to have the capital to start the business.
If you take the venture capital money, you’ll have to give up a big chunk of the business, and you’re a little worried about borrowing money from friends and family because of a previous business that didn’t go so well. The previous business did it, and it made them all rich. So what should I do? Should you take some money from your friends and family, but not enough to really hurt them in the event of failure, and take the rest from the angel investor who will also be on your executive management team, if only part time since are you a retired man? These are all good questions.
These are things that entrepreneurs need to consider when building their company or seeking capital for a startup. There is an advantage to having an angel investor who doesn’t just want to sit on the sidelines and has some monetary interest. Of course, if he is using his money, it is possible that he will become somewhat dictatorial in the future. As long as the personalities match, and the two can work together, this could be a match made in heaven, or have unfortunate consequences that lead to hell. In fact, I hope you will please consider all of this and think about it.