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If you ask a successful tech entrepreneur if they’ve made any angel investments, more often than not the answer is yes. Only, if you follow up that question with “have you made money”, the answer is almost always the same: no. Yet, many are still interested in angel investing as they see value in their existing investments, want to help entrepreneurs, and, of course, want to make out-sized returns.

I’ve found that after successful tech entrepreneurs scratch the itch of making a few angel investments, they don’t make any more investments even though they are casually interested in doing so. After probing why they haven’t made more investments, it always comes down to one main reason: they haven’t made any cash on the existing investments because they haven’t had any exits and the existing investments are illiquid.

Angel investments often take 7+ years to see a return, if any comes at all. So, after making a few investments, and not having any liquidity for a few years, angel investors get cold feet and don’t write more checks. Add in challenges like having to invest more money to maintain ownership positions for future financings (assuming pro-rata rights are respected by subsequent investors) combined with continued uncertainty about the outcome, and it’s clear that angel investing is much less glamorous than it appears.

Angel investors have a dilemma in that there’s no cash flow and an extended horizon to see any return, as well as no liquidity. Yet, there’s such great potential, both to help an entrepreneur and make a difference. Angel investing is difficult, very difficult.

What else? What are your thoughts on the angel investor dilemma of an illiquid financial model with a long-term horizon combined with the opportunity to help entrepreneurs change the world?

One of the more common refrains I hear from entrepreneurs with a working product is that sales aren’t where they had hoped. Peeling back the layers, the real issue is that entrepreneurs are impatient and want to see results immediately.

Now, on the other hand, entrepreneurs are patient in that it takes a tremendous amount of time to see a pay-off for all the risk, if they have any success at all. It takes years to get a business off the ground and in a position that’s sustainable and predictable. But, of course, during the process of building a business, most entrepreneurs are super impatient. Here are common issues:

The product is taking too long to build.

The suppliers are too slow.

The sales people can’t close deals fast enough.

The potential investors take too long to make a decision.

Impatient, impatient, impatient.

Being impatient is a healthy attribute as it’s correlated with pushing hard and constantly seeking results. Overall, it takes a unique person that’s patient with a long-term horizon and impatient with short-term results. Entrepreneurs are an unusual breed.

What else? What are your thoughts on entrepreneurs being both patient and impatient?

An important part of the startup ethos is equity and having an owner’s mentality, especially for early employees. Naturally, co-founders have a good chunk of equity along with investors, advisors, and employees. Early employees will often have equity in the range of .1% – 1%, depending on the role, experience level, and salary (executives and key hires often have larger percentages of equity depending on the stage of the startup).

Here are a few thoughts on early employee equity in a startup:

• Vesting of equity is common with it being either time-based (e.g. vesting over four years) or performance-based (e.g. vesting based on hitting milestones)
• Salary and equity should have an inverse relationship with market-rate salaries having less equity and below-market salaries having more equity
• Tempering expectations as to getting rich off early employee equity is important – I like to present it as if we do well, it’ll pay for a new car; if we do great, it’ll pay for a new house; and if we are a once-in-a-generation company, it’ll pay for a new life
• Cash compensation should cover minimum lifestyle expenses, if possible, otherwise the added stress of not making ends meet can derail the focus on making the startup successful
• Ownership percentages aren’t static – raising money from investors as well as issuing more stock options will result in dilution, which is a normal part of growing a business

Equity is an important and sometimes challenging topic. Early employees in a startup would do well to further research it and have a conversation with the founders of their startup.

What else? What are some other thoughts on early employee equity in a startup?

Life as a first-time entrepreneur is well documented. Naturally, things change on the next entrepreneurial venture, especially when the first time goes well. Here are a few differences as an entrepreneur on the next venture:

• Culture – Eventually entrepreneurs arrive at the understanding that people trump all other opportunities and challenges in a startup, making a focus on culture from the beginning more commonplace
• Hiring – People want to be part of a team with proven success, making the recruiting process easier
• Rhythm, Data, and Priorities – Whether it’s Mastering the Rockefeller Habits, or some other methodology, the second time around is easier due to having an established management process
• Capital – Raising money is much easier after having a successful exit and investment terms are more entrepreneur friendly

Finding product / market fit, building a customer acquisition machine, and scaling the business are still extremely difficult, regardless of being a first-time or tenth-time entrepreneur. Startups are hard, but having gone through it before makes entrepreneurs on their next venture more confident and more likely to not make the same mistakes.

What else? What are some other differences as an entrepreneur on the next venture?