Venture Capitalists Hijack “Angel Investor” Term?

I read an article today about some “Angel” group in New York City, and I realized something horrible is happening. It seems VC’s are trying to disguise themselves as Angel Investors. Maybe to attract more startups? Maybe to appear less frightening? Maybe to shed the negative “aura” attached to VC’s?

It used to be that Angel investors gave small amounts of money to startups, not because they were looking to make an “Exit”. The meetings were one-on-one, it was personal, it was friendly warm and humane. The Angel investor remembered himself being in the Entrepreneur’s shoes, and was not afraid to say things that were perhaps not very politically correct. When you’re doing a one-on-one, that works fine, but when you’re in a group, you will most likely remain politically correct, and refrain from giving the kind of advice you’d give in a one-on-one session.

So when I read that article about how that group of “Angel Investors” operates, it sounded to me more like a group of Bankers or VC’s, than a group of Angels. I was quite annoyed to say the least. While I have no problem presenting my company to a crowd, when it comes to an investment meeting, I do not believe elevator speeches or 15 minute presentations are the right tool to present to Angel investors (or in fact to any investor).

How it’s actually supposed to work

I believe in two people meeting and taking a deep dive into the core of the startup being presented. One is the Entrepreneur, who may be seeing his own startup for the first time being reflected from the perspective of the Angel investor (an eye opening experience, to some!), and the second is the Angel investor, who has the challenge and responsibility of getting into the Entrepreneur’s mind.

I do not believe in a murder of crows (bunch of VC’s sitting in a room, with a lone entrepreneur presenting to them). This is not “American Idol”. It is criminally presumptuous to think that you can judge a startup from one short presentation. It’s also sad to think that a startup might get filtered out because the entrepreneur fumbled some of the answers. Not everybody was born a Steve Jobs, and even Steve Jobs was not born Steve Jobs. He was shaped and hardened by his life and experiences, over a very long period of time. An entrepreneur is not there to entertain with a magical presentation that came out of a unicorn ass hopping happily on a rainbow.

Any veteran partner of any business will tell you – A partnership is like marriage. And like in most good marriages, you will find people who nurture each other, allow each other to grow, allow each other to make mistakes and learn from those mistakes, not judge each other so harshly all the time, etc.

So yes – I believe in one on one sessions, where even if the entrepreneur is rejected by the angel investor, at least he came out of it with tons of personal advice; he came out of it smarter. Maybe the angel investor also learned something. Maybe he learned something he would never have learned, about that person standing in front of him, if he were in a room full of other angel investors. Something that might have changed his mind, and made him into a fan and a believer, rather than a minute-judge.

Angels can’t possible know everything, right? After all, while many of them succeeded because of personal sacrifices and some very hard work, some of it was also pure luck, being in the right place in the right time, and knowing the right people – How many people know the right people? Despite the world being small, not too many.

So be humble, be humane, be respecting of yourself and others, regardless of how many silly ideas were/are presented to you. You are dealing with people, and while money is important, so is the journey. Do you feel a bit “burnt”? Do the right thing and take a short (or long) vacation from investing, just whatever you do, don’t vent your accumulated frustrations on entrepreneurs.

So am I doomed as an entrepreneur?

No. I believe the good old Angel Investors still exist, and are out there somewhere. You just need to steer clear from the rotten ones. When you consider meeting with an angel investor, check the following list:

  • Was it easy to get a meeting with the angel investor? or did they do you a favor and gave you a meeting some 30 ~ 50 days from today? Bonus points if you managed to talk to the Angel Investor directly, and did not have to go through bureaucracy or secretaries.
  • Are they investing on their own, or in “packs of wolves”? I recommend you avoid “panels” with 3 or more investors. If an Angel investor is incapable of deciding on his own whether or not he likes your idea, you don’t want him or his money.
  • Are you expected to prepare a detailed business plan? show traction? That’s not angel investment, that’s venture capital. Stay away from those clowns looking to make money on your exit, and find a real Angel Investor.
  • Is the investor constantly late, difficult to reach, canceling/postponing meetings, and is generally flaky? You should ask yourself if you really want to do business with a disorganized entity. Especially as you take your first steps setting up your venture, you can not afford wasting time on cancelled meetings and flakiness.
  • Are they behaving like assholes, trying to lump sum your ideas into a narrow category, and completely missing the point? Telling you there is already a company like yours out there? (Google was not the first search engine, Yahoo was not the first news portal, and Skype was not the first VoIP app!). Are they just plain being rude? Get out of there and don’t come back. And warn your friends.
  • Is the Angel Investor knowledgable? Are they asking you smart questions? Do they understand your answers, or are they foggy at best? The best investors, are investors who understand your venture on a deep level. They may even become your fans and followers, if your idea really touched them. That’s the kind of Angel Investor you want, and should strive to find.