Supporting – Winning Angels: the 7 fundamentals of early-stage investing.

Winning Angels: The 7 fundamentals of early stage investing ...

It is understood that airplanes burn vastly more amounts of fuel taking off and accenting to cruising altitude than they do for the remainder of the flight.  I had a boss and career mentor use that point often to me early in my career as he made the analogy that the energy spent early in your business may seem disproportionate but it pays for itself later.  Another life mentor has told me many times that airplanes are constantly falling.  The aerodynamics of the plane along with a measured amount of energy keep the plane in the air.  His point was to take care of yourself and your “dynamics” and understand where to focus your energy.  I have also heard many times that flying is just falling with style.  I could conclude the comparison here that every business can fail at some premature point in its flight.  You can tell that I enjoyed the special sections 3 and 4 of the Supporting Fundamental where Amis and Stephenson review an excerpt from David Berkus’s book Better Than Money where Berkus uses a lot of flight analogies to describe a failing business and the options in bankruptcy.

Berkus makes the point that “any landing you can walk away from is good landing “cause you’ll live to fly again tomorrow””  So how do we recognize when our business may be failing and how do we fail correctly if there is no way to save it.  Berkus also points out that many entrepreneurs, as many times they are in the pilot’s seat, may not be able to recognize when the business is failing until it is too late.  Eminent bankruptcy may not only be hard to recognize for an inexperienced entrepreneur, but it may be a reality they do not want to face and may look to ignore it.  Forecasting and Horizon scanning would be an important exercise for any entrepreneur and could give them the opportunity for contingency planning in case of failure.  Most importantly, there reputation is at stake and how they hand the failure professionally may work in their favor for future ventures, living the fly another day. 

I think it is easy to see where the founding entrepreneur may not have the best perspective to assess the overall health of the start-up.  Only the most experienced that may have been through a failure may be able to recognize the subtle slow growing problems that can lead to bankruptcy and have the emotional competency to keep their ego in check.  As angels have varying intentions of time and effort they will give to their roll in the start-up, the situation of an inexperienced entrepreneur may be where a lead investor is most needed.  Supporting the entrepreneur with leadership and more importantly a different vantage point to recognize failures can provide much value.  The reputation of all are at stake at how they handle any upcoming failure.

Until then, many of us seem to be on the runway and fine tuning our engines. 

Reference:

Amis, D., & Stevenson, H. H. (2001). Winning angels: the seven fundamentals of early-stage investing. London: Financial Times Prentice Hall.

6 thoughts on “Supporting – Winning Angels: the 7 fundamentals of early-stage investing.

  1. Jeramy,
    Great post! It is important for entrepreneurs to have a contingency plan for when part of the business takes an unexpected turn. While no one can prepare for all possibilities that may occur, it is a good idea to know what steps will be taken to handle an unexpected situation which would jeopardize the business. As with many jobs, everyone has a contingency plan in the event something drastic occurs.

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  2. Thanks for posting Audrey! You are right…contingency plans seem like a no brainer and easy but many times get left behind as we typically do not plan to fail. Interesting read for sure.
    Best!

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  3. Jeramy,

    Your opening reminds me of an eagle. Once an eagle reaches its soaring level there is no longer a need to flap its wings. It soars effortlessly. I agree that the start up is hardest part and requires a lot of organization and evaluation to ensure the success of the business. Holding your momentum is a bit easier once you get started. Great post!

    Best,
    Shannon

    Liked by 1 person

  4. I love the flight analogies! It was great to hear about your experiences and the advise you received from mentors in the past, and how well it relates to the concept of angel investing and in business practice. I agree with you about the detrimental effects of inexperience. The way I see it, investors can be a pool of experience points that an entrepreneur can dip into to increase their awareness. This essentially gives them a bonus as they try to get their companies off the ground, as long as they choose to listen to the advice of those investors. If it were a D&D game, you would be able to add the ability modifiers of your investment party to your natural score to increase your success rate on ability checks. I didn’t expect to be able to make a Dungeons & Dragons reference in this course, but I just did!

    Liked by 1 person

  5. I enjoyed reading your post on supporting! The comparison to airplanes was a nice touch. I agree that inexperienced entrepreneurs should seek experienced investors that can offer them advice. This is exactly why I would seek a supportive investor, if I decide to seek investors, as I do not have any extensive entrepreneurial experience. Great post!

    Liked by 1 person

  6. You reiterate some really good points from the chapter. I think this is why it is important to not just sit back and let the money ride. It is important that you build some reporting structure/timelines into your deal so that you get regular updates before it is too late. A lot of entrepreneurs experience the sunken cost fallacy. They think that oh I have already spent $200,000, it won’t hurt to spend another $20,000. Supporting and holding the entrepreneur accountable is very important.

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