When Angel Investing Isn’t Charity

Over the years I’ve gone on the record saying angel investing should be viewed as charity work for the majority of investors out there. Why? As an angel investor you get intangible benefits helping entrepreneurs and you’ll almost always lose all your money. Yep, sounds like charity to me.

Now, angel investing isn’t always charity. I know a handful of people in town — less than 10 — that have done well as angel investors. Here’s what they have in common:

  • Long-Term Focus – Angel investing has incredibly long-time horizons. An “average” investment takes 7-10 years to see a return, and most investments don’t see any returns. Angel investors that do it for fun when the market is hot — known as “tourists” — quickly leave when they see just how hard it is to make money, and how messy it is to build a startup.
  • Dozens of Investments – Angels often think that if they make three or four investments, one of them will do well. For angels to make it work, it takes dozens of investments. Think about investing $50,000 per deal, and saving 2x that for startups that go on to raise future rounds. Over dozens of rounds, plus a limited number of follow on rounds, it’s well over $1,000,000 to build a true portfolio.
  • Time Allocation – Sourcing dozens of investments, and talking to hundreds of entrepreneurs, requires a huge amount of time. Most entrepreneurs and ideas aren’t investable upon first meeting, and all investments take multiple meetings.
  • Defined Strategy – With tons of entrepreneurial styles, startup industries, and technologies, it can be overwhelming to pick investments. Successful angels define a thesis or strategy and use it to help in their decision making process. Most bet on people and markets.

For angel investors that have a long-term focus, make dozens of investments, allocate a sufficient amount of time, and have a defined strategy, angel investing isn’t charity work. For all others, they’re providing a charitable service.

What else? What are some more thoughts on when angel investing isn’t charity?

Video of the Week: How the blockchain is changing money and business | Don Tapscott

For our video of the week, watch How the blockchain is changing money and business | Don Tapscott. Enjoy!

From YouTube:
What is the blockchain? If you don’t know, you should; if you do, chances are you still need some clarification on how it actually works. Don Tapscott is here to help, demystifying this world-changing, trust-building technology which, he says, represents nothing less than the second generation of the internet and holds the potential to transform money, business, government and society.

Entrepreneur Evolution Over Time

One of the amazing experiences that comes with investing in entrepreneurs is seeing the entrepreneurs evolve over time. Early on, the entrepreneur is blissfully ignorant about what lies ahead and grinds it out to (hopefully!) to an early milestone of a million recurring, willing the startup forward. Then, slowly, it becomes clear that the entrepreneur needs to go from doer to manager (see Maker’s Schedule, Manager’s Schedule).

As a manager, the entrepreneur struggles. People require trust, and systems, and patience. The entrepreneur wants results, now. Slowly, after many mistakes, this whole people thing starts to come together. Culture starts to become important. More lessons, more learning.

Then, the next challenge: becoming a manager of managers. More people, more processes. More debating whether to work in the business or on the business. Onward and upward.

The entrepreneur evolution is fascinating. No two journeys are the same, but all are interesting.

What else? What are some more thoughts on the entrepreneur evolution over time?

The 7 Words Entrepreneurs Should Use Frequently

Entrepreneurs have a variety of leadership styles. One my favorites is servant leadership, defined as:

…both a leadership philosophy and set of leadership practices. Traditional leadership generally involves the accumulation and exercise of power by one at the “top of the pyramid.” By comparison, the servant-leader shares power, puts the needs of others first and helps people develop and perform as highly as possible. Servant leadership turns the power pyramid upside down; instead of the people working to serve the leader, the leader exists to serve the people.

Entrepreneurs that believe in servant leadership should use these seven words frequently:

Let me know how I can help

Pretty simple, right? These seven words show that you’re proactive and want to help. Many people want help. Fewer people ask for help. Servant entrepreneurs would do well to incorporate these seven words.

What else? What are some more thoughts on servant entrepreneurs using these seven words?

Deliver a Simple Message

Yesterday’s post Write Your Equivalent of The Secret Tesla Motors Master Plan drove home a really important point: deliver a simple message. The master plan is all of 35 words, in plain English, with no jargon. How many entrepreneurs deliver plans like that? Very few.

Simple messages don’t mean incomplete messages. Take the Simplified One Page Strategic Plan as an example. The document has a wealth of information but it’s not verbose. Every word and every category matter. The fewer the words, the more likely it’ll be read, but the entire message still needs to be communicated.

Entrepreneurs would do well to deliver a simple message, and repeat it often.

What else? What are some more thoughts on the idea of delivering a simple message?

Write Your Equivalent of The Secret Tesla Motors Master Plan

Exactly 11 years ago from tomorrow Elon Musk famously published The Secret Tesla Motors Master Plan (just between you and me). Few people read it then and most that did didn’t take it seriously. Only, now, over a decade later, it’s come to fruition. And, from that, entrepreneurs should learn an important lesson.

But first, from the post, the master plan is:

  1. Build sports car
  2. Use that money to build an affordable car
  3. Use that money to build an even more affordable car
  4. While doing above, also provide zero emission electric power generation options
  5. Don’t tell anyone.

Entrepreneurs should take this concept — a simple long term master plan — and write one out for their startup. Make it clear, concise, and easily understood. Then, share it with everyone.

The best way to see the future is to invent it.

What else? What are some more thoughts on the Secret Tesla Motors Plan and entrepreneurs building their own plan?

Atlanta Startup Village #49

Atlanta Startup Village #49 just finished up at the Atlanta Tech Village. The event is free and open to the public. Join us.

Here were tonight’s presenting startups:

  • Fetch: Truck Rental Made Easy
  • Leadkit: Real Estate Technology & Lead Generation for the Modern Agent
  • Zenway: Data analytics for the next generation of super-efficient clean vehicles
  • Profound Studio: Expert home recording help
  • BashBlok: Make your Bash a Smash

Visiting Atlanta in the future? Join us at an Atlanta Startup Village event.