Tag Archives: entrepeneur

Before and after an angel investment; stories about why angels are once bitten, twice shy

Outside of Silicon Valley it is extremely hard to raise any financing for a startup. It is not unusual to hear about a $250K – $500K round taking more than 2 or 3 months to close. If the entrepreneur is a first-time founder, without any pedigree (top tier school, well known previous employer) expect it to take longer. In fact according to the data shared by Mar Hershenson (slides below) angels now are not investing until you have some traction.

There are many reasons why angels take so long to invest and insist on multiple meetings, due diligence and more data before they invest relatively small sum of money such as $25K – $50K. Besides the usual reasons such as “hard-earned money”,  “better investment options elsewhere”, etc. there is one issue that rarely gets discussed outside closed rooms or in private messages.

The lack of information sharing by entrepreneurs once a round is closed.

I dont think it has anything to do with if the company is doing well or not. Some entrepreneurs just don’t keep their investors in the loop – writing that off as “busy work”, “don’t have time – building the business, gaining customers”, etc.

Looking at my investments alone, 3 of the companies have founders who were referred to me by friends have founders in this bucket. Before my investment, I would get an email or WhatsApp message every 2-3 days with a request for follow-up meetings. One of them was very persistent, following up with me for 5 months before my investment.

After the investment however, radio silence. Now, I have to reach out to them every 6 months or a year to find out how they are doing. While previously I would get a response to an email in a day, now 50% of emails are not being responded to.

To be honest, I understand that entrepreneurs are busy. Unlike VCs who have information rights and have an ongoing cadence with the CEO as part of the board, angels rarely do. Angel investments are mostly passive, with a promise to help with “network” and “connections”. In many cases these are marginally relevant to the entrepreneur.

I have however now developed a new set of checks to ensure I don’t go down the path of an incommunicado entrepreneur.

I ask to be sent their weekly / monthly update to investors or the team for 2 months. The quality, timeliness and consistency of the emails gives me a clear indication about if the entrepreneur is even going to keep others in the know or in the dark.

This is only one of several checks but, if you are an entrepreneur, having a frequent (monthly) update on highlights, low-lights and insights about your business, key milestones and next steps helps you and the investors find ways to help you.

Vision, Execution and Communication, what makes entrepreneurial founders, great CEO’s

It is often said that the most important things a startup founder and CEO needs to focus on is setting the vision and communicating it effectively, hiring the right people and making sure there’s enough money in the bank.

In the early stages though, the vision is less clear for a company for many founders. What’s more clear (to most entrepreneurs) I assume is the problem they are trying to solve. Or, in many cases the solution they are trying to build.

If you over index on good or excellent execution but have not a clear, well thought out vision, the market, investors and employees will give you time and room to develop. Case in point, it was not always clear what Twitter’s vision was to most people (and probably is still not clear).

So, if you have a great, compelling vision for the future of how the industry (like Marc Benioff did with Salesforce.com), then it does make it easier to grow, fund and scale the company, but if you dont, I wont sweat it.

There are many forms of communication, but the 3 I am focusing on are public speaking, written communication and articulation in a personal setting.

Not surprisingly, if you are afraid of public speaking (which apparently is the 2nd most feared thing for most people after death), the market does give you some leeway. There are many entrepreneurs and senior executives who I know, personally, who are poor public speakers and are not at all charismatic. That usually does not seem to stunt their progress though.

If you are not great at written communication, (which can easily be fixed BTW, with practice), the world is not going to end. It does help, but you only have to keep in mind that over 80% of successful founders in the unicorn list have trouble writing something meaningful even with the 140 character limit that Twitter proposes.

If however you can’t articulate the problem you are trying to solve in 1-1 situations or answer the difficult questions about why your company exists, what it does and how it will solve a problem, then potential co-founders, employees, investors and customers will not give you much leeway.

There are certain situations when even poor articulation (which I have seen multiple times when folks come to pitch their product to us) is something we accept and assume we can help with.

That situation is when someone has executed very well. Whether it is building a compelling product, getting early customers, growing user base or raising funding rounds, doing beats telling 95% of the time.

From time to time, we (potential employees, customers or investors) get enamored by a good story, articulated by a charismatic, passionate and visionary founder, and it may happen more than in exceptions than the rule.

The thing is though, you can’t argue with execution at the partner meeting or at the customer review or when you are talking to your friends about a company you want to join.

Either they did what they did or did not – either they got users and growth or not. They have customers or they dont. They have a product that users like or they dont.

They executed or they did not.

Which is why, even if you being told you dont have a great vision or that you are poor at telling your story or you have bad communication skills, take heart.

If you out-execute and show the proof in the pudding, by numbers, metrics and growth, the market and the participants will let you get away with your “weaknesses” or perceived faults in vision or communication.