The other day I was talking to a small business entrepreneur who had some family and friends with a bit of money. His new idea and invention for his next enterprise is relatively sound, but it is disruptive technology. He also has a friend who is an angel investor, and a few friends who are venture capitalists, so we has sources of capital to get this going. He's wondering which group he should borrow the money from because it doesn't look like he can go to a bank locally and get the money he needs to build his company. Okay so let's talk and let me explain the scenario here.
The angel investor happens to have a little bit of experience in the industry, but my entrepreneurial friend will be a disruptive technology and may not sit too well with many of the folks in the Industry Association. Nevertheless, this potential angel investor has an incredible amount of knowledge and background and could help make inroads into the industry, and has lots of contacts of potential vendors and potential corporate partners as customers. The angel investor doesn't just want to sit on the sidelines he'd like to use his expertise and help build the company as well.
In other words my entrepreneurial friend will get free mentoring, consulting, and coaching services along with the investment. In many regards if you were to hire that level of expertise it would cost him a pretty penny, but in this case he basically gets a free partner, someone to go to, and help him over the hump. Perhaps the question is; will this investing angel slow him down in the marketplace, or help them succeed? The reason I ask that is because the angel may be used to doing things the old way not the new way. Still, the entrepreneur needs to have the capital to get the business going.
If he takes the venture capital money he will have to give up too much of the company, and he is slightly worried about borrowing money from friends and family because of a previous business that didn't go so well. The business before that did, and made them all wealthy. So what should he do? Should he take some money from his friends and family, but not enough to really hurt them in case of failure, and take the remainder from the angel investor who will also be on his executive management team, even if only part-time since he is a retired gentleman? These are all good questions.
These are things that entrepreneurs needs to consider when building their company or looking for 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 monied interest. Of course, if you are using his money, it is possible he could become somewhat dictatorial in the future. Provided the personalities match up, and the two can work together this could be a match made in heaven, or have unfortunate consequences leading to a living hell. Indeed I hope you will please consider all this and think on it.
Lance Winslow has launched a new provocative series of eBooks on Business Concepts. Lance Winslow is a retired Founder of a Nationwide Franchise Chain, and now runs the Online Think Tank; http://www.worldthinktank.net
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