Entrepreneurs Turned Investor (credit Venture Giant)

Entrepreneurs investing in other entrepreneurs

A side-effect of product entrepreneurs from 2000’s starting and building a cash-flow business is that many have the money to become “angel” investors.

I wrote about the unique Indian trait of survival because it is hard to shutdown a business. I believe that’s resulting in many new angel investors who understand entrepreneurship and starting up. Which is a good thing, overall, with some caveats.

Most of these business people were still “young” and folks I would consider likely to be founders again, but they are now starting to “invest” in other startups as an investor.

That’s really strange. Or not, I guess. I don’t know.

I mean, the biggest investment you can make is in your own talent, business and capabilities.

Then why would you take your hard earned money and invest in others? That makes no sense, especially given how little you made in revenue or profit.

I asked 2 (not all of them were investing in other companies, only 3 were) of them why they were investing in other businesses instead of putting the money to grow their own business, and their answers ranged from “Saw an opportunity” to “Wanted to help a friend” and “This market is fairly small, and I cant leave it, so I am diversifying”.

I don’t know what to think – whether it is admirable that they were investing in others and “giving back” or lack of imagination for their own venture that they were “unable to direct investment in their own business to channel growth”.

That’s not even the kicker.

Two of them asked if I’d be interested in taking a look at their business to fund growth.

Entrepreneurs Turned Investor (credit Venture Giant)
Entrepreneurs Turned Investor (credit Venture Giant)

If your business was not growing fast enough, and was generating “cash flow” to pay the bills but not more, and you were unwilling to fund its growth yourself, why would you assume another investor would?

First, the growth clearly does not exist.

Second, you seem to think the opportunities are elsewhere.

Finally, you are divesting actively from the business yourself to find growth elsewhere.

They did give me some reasons – the money they were generating was not enough to grow and they needed a lot more cash to invest but the opportunity was “super-large” and they were constrained by “running” the business which forced them to not hire people to scale, etc.

I am not sure how to read this.  I am positive that this will result in more “entrepreneur turned business people” investing actively in other startups, but it is a trend for sure.