With the ever increasing number of seed funds and exponential increase in HNW (high net worth)individuals investing in the space, angel investors must now more than ever be able to provide something more than just a cheque; Angels must be able to offer ‘smart money’.
What is Smart Money?
Smart money, as an entrepreneur will see it, is money that comes with additional non-monetary benefits that will give the company a better chance of success. While many angel investors can offer a range of additional benefits, the big four that any company can benefit from are outlined below.
Despite the common founder’s notion that their product is so revolutionary that WIRED and TechCrunch will both want to feature it automatically, this is in fact a very rare occurrence. Having a prominent angel on board can not only add to the "story" behind the company but, can also help through the angel providing access to media contacts gained from previous ventures.
2. Moral Support:
The Founder’s job is undoubtedly the most stressful profession known to man. As a result, in the early days the role of the investor is not to solely provide business advice but to support the entrepreneur emotionally, to handle the stress and pressure of running a startup. This can be through regular informal meetings to assess the mindset of the founder and aid if necessary or even a daily check up email. However, it is crucial to remember as an angel founders do not just need strategic advice but emotional support when needed.
Undoubtedly one of the most challenging aspects of starting a startup is assembling a strong team. As a Founder life is extremely hectic, therefore, heading up recruitment does not always reside at the top of the priorities list. An experienced angel can communicate with their network and assess individuals who might be a good fit for the job and thus, massively unburden the founder and strengthen their investment with a strong team.
4. Connections to Additional Investors:
The importance of continuous funding can never be overstated and the freedom that a financial war chest provides is unparalleled. As a result, if you as an angel can provide connections to additional funders then your venture will not only benefit from additional capital, but from the additonal experience, support, visibility, and everything else tied into smart money that the new investors will add.
While it is true that most start-ups go bust, the more value an angel can bring beyond the money, the more chance the company will have to succeed.
I've only listed a few of the additional benefits angels can bring to a deal, do use the comments section to add more or ask questions about what I've written above.