Angel reversing like a taxi ride
In the intricate microcosm of Silicon Valley, it is more common to find a person who is an ‘angel investor’ than a person who owns a bicycle. Angel investors, by definition, allocate a small amount of their own mutual funds to support businesses that provide businesses with a financial lift. One thing that few people realize is that getting into the taxi requires being prepared, knowing where you are going and when you think you will be leaving.
So in financial terms to access angel investments, you must:
1. Get in the taxi: must be able to walk on both feet or with the help of a device. We do not invest unless you have an established company, a tax ID, a defined product or service, a prototype or a defined set of promises, some form of market validation (sorry, your friends don’t count). We don’t accept crawling babies without parents, but we take babies with parents and we call it pivoting. And yes, both babies and parents get off at the next stop.
2. Bring a wallet. Have some skin in the game. The best way to put this in perspective is this: if you’re not going to take a risk, I’m not going to take it for you.
3. Speak the language. To understand each other, we need to speak the same language, and in many cases that means that the financial language must be clear to you. Oh yeah, and business language and execution language. You don’t need these languages to apply for some jobs, but if you want the entrepreneurial degree, you need the language to get hired.
4. Have direction. Knowing where you are going and how to measure whether you are on the right track is critical. Yes, there can be accidents, but you can make a plan B in place if you know where you are going. It also helps if you know the route, have taken a similar route before, or have advisers along the way who can register. Or you can take a walk with others and everyone benefits.
5. Accept some guidance. You may know the route, the goal, and the starting point, but we are in the transportation business. We are in this day after day, and we know when and where there is traffic, bottlenecks, stop signs and landing points. We also know the best time to take off, run and go. And we know what has or hasn’t changed since the last time he took a walk.
6. Plan your outing. Taxis need their space to carry more passengers. It will have to leave at some point. I once said that the best description of the angel investor-entrepreneur relationship was this: how can we part ways and be happy about our time together? This is one of the most exciting opportunities to create something in such a lost structure. Angel investors invite entrepreneurs to their taxis at the expense of other trips, spend time and resources together, and expect financial and emotional rewards. We want to feel good about taking it from here to there. Entrepreneurs must also choose who to travel with. You can’t go to the moon by bike, but you can enjoy the trip in a different way, and you WILL NEED that taxi to take you to the ferry landing, or to the airport, train station, port.
Thinking of Angel Investing as a time-defined transport helps you manage this financing mechanism, but if you want to finance your business, be it a small business or a young business, there are many other ways to do it. Don’t just think that angels are the only ways to finance a business. Sometimes not, and sometimes there is not even the best way.
Having an angel investing in your company does not define its success.