‘I believe that investing my time along with money protects my investment.’
When Björn Evers decides to invest, he knows that he’ll be committing much more than money to the venture: he is signing up to share his experience, open the doors to his network and, in some cases, join the team as a board member – or take a more hands-on approach, as he did with Jumio. While this tactic works for Björn, as evidenced by the success of his portfolio and, in particular, with Jumio, this isn’t the right tactic for all investors. Just as too many chefs spoil the broth, too many hands-on investors can sink the startup. Therefore, it’s important as an investor to know if, and when, your support could be useful.
Here are a few ideas for when you should pitch in.
You’ve got specific industry experience
The Siding with the Angels Nesta report claims that angels who invest in sectors where they have specific experience may receive higher returns. It’s a sentiment that’s been echoed across investment circles, and for good reason. When making an investment decision, having specific industry experience helps you understand the challenges a company may face in that industry and determine whether the entrepreneurs are capable of overcoming them.
But the real benefit occurs after the investment has been made. Knowing the industry and the challenges inherent within it – as well as how to overcome them – can be a game changer.
So, should an angel get involved if they have specific industry experience? Yes, from an advisory perspective.
You’ve got a network of potential suppliers/buyers/distributors
Early adopters are the hardest to come by. A business angel who can open the door to any of the above is incredibly useful at any stage of the company’s development, and particularly important in the very early days. Once the product/service has become successful with even a small number of early adopters, word will get out and there may be a nice snowball effect of others signing up or placing orders. Sales is the hardest part of any business – we’ll come back to this in the next point.
A word of advice: as an investor, the difficulty in opening up your network to the company in the very early days is that it is your reputation that is on the line if the company does not deliver. Therefore, you need to be certain that the company’s product/service is up to scratch, and you need to be sure the first buyers/distributors understand that what they’re getting is an early version and feedback is very much appreciated. A few freebies here and there to secure such feedback is definitely in order.
Should an angel get involved if they have a network of potential suppliers/buyers/distributors? Yes, to make the introduction to the network.
You’ve got functional experience in a role the company is looking to fill
Startups are often cash strapped, even post funding round, and may not be able to fill the roles that, while not essential, would benefit the company if filled. Often a company will overlook bringing in a head of sales as they will believe that to be the role of the founder(s). While the founders should help with sales, technical founders often lack the sales touch. If there an investor has significant experience in a head of sales capacity, their involvement as an advisor/coach on sales, or even in a part-time sales role, could do wonders for the company and for the founders.
Regarding other roles, if the company is in need of a role you as an investor have significant experience doing, and if you are sure you can contribute consistently, then and only then should you consider offering your services to the business.
But be prepared, startup life is very different than a nine-to-five and if you commit to helping out even just a little, you’ll be expected to deliver. You are better off not getting involved if you don’t think you’ll be able to be consistent with your effort, particularly as the rest of the team will be depending on you, as will some forecasts.
Should an angel get involved if they have the functional experience the company needs? Yes, but only if the investor is certain they can be involved in that capacity consistently. No if they cannot guarantee consistent involvement.
You know someone who might meet the above criteria
If you know someone who might make a good advisor, has a network that could benefit the company or may fill a role that is open, you should drop the company a line and let them know of the opportunity and ask how they would like to proceed. No more involvement is required beyond that.
Anybody can be a brand advocate
Regardless of investment size or how hands-on an investor is otherwise, all investors should fill the role of brand advocate. Word-of-mouth marketing is the most powerful form of marketing available to any company. As an investor, you should be spreading the good word of the company you’ve invested in wherever it is appropriate.
If the product/service is a consumer good, let those of your friends who could benefit from it know about it. If the good is B2B, is there a company you work with that would be better off using your startup over another supplier? Or do you know anybody in the PR world who might be interested in covering the wonderful things your startup is doing?
While the above may sound like a bit of faff, just think of all the serendipitous outcomes that could stem from a chance encounter that ultimately leads to your business being ‘company of the year’ and the founder on the cover of Forbes.
While it might not be to your style, why not just update your LinkedIn profile to include ‘Investor in XYZ’? It’s simple, requires minimal effort and who knows, it might just give your investment that extra push.