This section is about evaluating the potential deal between investor and entrepreneur. Like Winning Angels highlights, an investor has to be confident in the entrepreneurs they are going into business with.    The people include, not only the entrepreneur, but also the team members, other investors, advisors and stakeholders.  Also they mention “when assessing an entrepreneur, there are three “base” to cover: their goals, their knowledge, and their capabilities.” Assessing is important.  What are these investors getting into, is it worth the risk, how is their character, are they honest? So not only is the investor looking at the business plan, but they are looking at you as a person. 

            Another aspect that is important is timing. When is the right time for this venture, do we have customers ready for this product or service now, what is the competition and how well are they doing it.  It isn’t always about being first, but it needs to be done right and right time.  Whole there are some investors out there that want to only work with first movers as they say in the book, many others are more concerned with and focus on quality business models and teams. This is the type investor I would want for my business, someone that sees the long term goals and knows that the team is important. 

            Another discussion point was on page 120-122, what do investors do and what do winners do?  Love this section. I want to focus on the winners portions.  Reading through it, it is all about the plan of your business, your team, exit plan, and working with other investors.  This to me is what I would look for in an investor.  Someone who is not only interested in the business, but what makes the business happen (team), and the future even as far as exit plan. 

            So much to learn about investing and what goes into it.  Not only as an entrepreneur are you looking for the right investor, but the investors are also looking for the right investment.  As it said in the sourcing portion of the book, the partnership has to make since on both sides. Everyone has something to bring to the table, it is just about finding the right table for both sides.

Winning Angels: The Seven Fundamentals of Early-Stage Investing. Financial Times Prentice Hall, 2001.

8 Comments

  1. Katherine,
    You have some great thoughts on evaluating. I agree that the people aspect of an investment is essential but sometimes gets overlooked. Everyone going into the investment, including the support staff, should be checked out to ensure quality people. Nothing will sink an opportunity more rapidly than bad people.
    Timing is one of those aspects that we can have a hard time getting right. It is funny to think that depending upon when you time your product or service on the market; it could completely change the end outcome. Just bizarre when you think about failed companies from the past.

    Great work!

    Joe Rudy

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  2. Katherine,

    Great post. I am in agreement with you and Joe in regards to the importance of the entrepreneur and team involved in the investment opportunity. While this book is giving advice to the potential investor, I have also liked using the information provided and seeing these things through the eye of the entrepreneur looking to secure an investment. It has given me some good insight as to what a potential investor may be looking for in an opportunity. It certainly has shed some light on how we as entrepreneurs need to carry and present ourselves in the eyes of investors. You want to come off as hard working, confident, honest, and competitive. However, you also need to be careful not to come off as greedy or someone willing to cut corners. I was talking to a client of mine the other day who has his MBA and works in the business world about what I was currently studying in my program. As soon as I mentioned that we were studying angel investing he immediately brought up the point that investors are looking to invest in the entrepreneur, not necessarily the idea. One piece of advice he gave me is to never demand things like salary right off the bat. He said more often than not, if you just show your passion and desire to win without talking about how you hope to be compensated, then investors will make sure you are taken care of. They want entrepreneurs to stay happy and motivated because they understand the value they bring to a business. hey just don’t want the entrepreneur to be motivated by the wrong things.

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  3. Hi Katherine,
    Great point about the timing of the investment and the need for long-term investment from your investors. In these courses we are taking and in the books that are assigned generally seem to think the best of people. In reality, this is a type of business that expects fast results, and many people aren’t afraid to bring others down for their own profit. However, your point about making sure your investors see eye to eye with you is the key to being successful. As long as we surround ourselves with like-minded people and communicate about results we will hopefully all come out ahead in the long run.

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  4. Hi Katherine,
    Awesome post! You brought up some really great points for this selection. I totally agree with you– finding an investor who has a clear strategy and life cycle in place is so important. Even if plans change over time due to external factors, being able to align your business with a quality investor who envisions a relationship from the start of a business to the exiting stage can mean a world of difference for the state of a company. In echoing what Zach wrote, who we are as entrepreneurs needs to be reflected in all of our dealings and it is absolutely necessary to craft and maintain an image of ourselves to clients and investors that promotes our business with positivity. Thinking in-line with the investor can build confidence in the relationship and help projects propel forward with ease.

    Cheers,
    Taylor

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  5. Hi Katherine,
    I enjoyed reading your post and was happy to see you bring up timing. It is critical, and I have seen a few entrepreneurs hit it big because of timing, even if they weren’t the greatest leaders. I also love the section on what winning investors do. Best Ed

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  6. Hey Katherine,

    I think it is essential for investors to look at the business model and the team members from top to bottom. Without the right people, one could go into a situation where people, due to several unfavorable characteristics, could run the business into the ground and even ruin the investor’s reputation; having the right people are imperative not only for ethical reasons but also you want the proper skilled/talented, positive mission-driven type of people/team.

    The timing was also another part of this section that was interesting that one may have the perfect business model, but the timing of the market, economy or other factors was not right; I enjoyed your reflection.

    Best,

    Stokes Warren

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  7. Katherine,
    It is critical that the investor and entrepreneur do research about each other before committing to a deal. The source of the idea and the funding need to know that they agree with each other’s goals, vision and beliefs before formally partnering or there could be serious consequences for both parties down the road. It is important that this relationship be strong and entail open communication. Without an open line of communication, one side can feel as if they are being taken advantage of when eventually throwing around dollar signs and suggestions on how to improve the business plan.
    Great post!
    Brittany

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  8. Katherine:

    I agree with your comments that it is vital for an entrepreneur to get the timing right when launching their venture to attract the right investors. The book has been insightful regarding the different types of investors that are out there and their expectations. Finding an investor that fits your business plan is one factor I will remember to incorporate in my plan.

    Adam

    Like

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