This is the second to the last entry in my series of blogs on angel investing. I have been nose deep in Winning Angels: The Seven Fundamentals of Early-stage Investing by David Amis and Howard Stevenson. This particular installation brings us to the sixth fundamental of early-stage investing, supporting.
Angel investors can provide more than just financial support via capital investments. Supporting takes into consideration what level of participation or role an angel is to play in an investment deal. This is where it can prove important for the angel investor you are working with to have experience working in your industry or working with similar ventures. According to authors Amis and Stevenson, some investors seek out and choose opportunities that need a lot of support, and then take on participation roles that address the needs and wants of you, the entrepreneur, your business, and themselves.
What I found odd in this section is that Amis and Stevenson talk about the “five” participation roles in Chapter 43, but they actually list six roles. Nevertheless, what I really want to deliver to you is the short and quick on what support angel investors can provide for you, the entrepreneur. In my reading and research on the particular fundamental, I found an article by the IESE Business school on Entrepreneur about the six supporting roles which lines up directly with Amis and Stevenson’s work.
A silent investor makes their financial contribution and stays out the way with no involvement. This type of investor will support you in a monetary manner but will keep their hands out of your business while they wait for their return on investment. For entrepreneurs who want to keep control of their business, working with an investor who plays this role could be very beneficial.
The reserve force investor will step in where needed and will help you when you ask for their assistance and support. Otherwise these investors will be waiting in the wings.
Angel investors that take on the lead of team leader are very active and can take on a full or part time role. Here, you have to be careful as a business owner as investors can become overbearing or begin to micro-manage especially if the investor has a huge investment in your business.
The lead role is taken on by an investor that either contributes the majority of capital or if they bring other investors in after them. A lead investor can have a heavy influence on other investors joining in. It is very important for you to understand who your lead is as they have a major impact in a lot of areas.
An angel investor that takes on the coach role will mentor the entrepreneur. Amis and Stevenson say this is the highest impact investor who does not actually control the company. I feel that this type of investor could prove beneficial for small business owners. They will give advice and support to the entrepreneur but remain on the sidelines.
A controlling investor will take control of the deal and in managing the company. An entrepreneur that wants to have control of their company would never want to enter into a deal with an angel investor looking to take on this role.
From the entrepreneur’s standpoint, it is very important for you to understand the different roles that an angel investor can take and even more important for you to make sure that you understand what role the investor you enter a deal with is going to take in your business.
Amis, D., & Stevenson, H. (2001). Winning Angels: The Seven Fundamental of Early-stage Investing. Pearson Education Limited.
School, I. B. (2015, 10 16). The Seven Secrets Of Top Angel Investors. Retrieved from Forbes: https://www.forbes.com/sites/iese/2015/10/16/the-seven-secrets-of-top-angel-investors/#6b30ee256eae