Angels Come with Strings Attached
Did you ever hear about the entrepreneur who, upon returning from a quick lunch, finds his angel investor sitting in his office? The angel greets him with the question, “Where have you been?” Upon hearing the answer, the angel responds, “I don’t see how you have time for lunch given the fact that last months sales were 3.5% below budget.”
Don’t laugh, it happens more than you think.
Obviously this isn’t exactly what you were expecting when you took your angel’s money. In addition to your angel’s money, you expected him or her to provide advice, contacts, and support, but not unwarranted sarcasm and criticism.
So how do you ensure that your relationship with your angel meets your expectations and your angel’s expectations in a positive and productive way?
The answer is really quite simple: In addition to the legal agreement that covers the exchange of shares for cash, you need a written or unwritten agreement that carefully and thoughtfully sets forth the terms and conditions of your working relationship. Issues to be covered might include:
- Detailed discussion of the contributions you expect from your angel;
- A very clear understanding of how you intend to run the business;
- Type and frequency of shareholder reports;
- Most appropriate forms of communications; and
- How and when the angel might expect repayments or distributions.
If you and your angel are unable to mutually agree on any of the above points as well as other expectations specific to your business, then do not take their money. Find an angel that you can harmoniously live with. It will be more pleasant, productive, and profitable for all concerned.
If you have some stories about dealing with difficult angels, or if you have some tips to share, please leave a comment below!
|Author(s)||Jimmy Lewin (other articles by Jimmy Lewin)|
|Original Publication Date||February 5, 2010|
|Related categories||Raising Capital|
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