What disappoints me most about the entire “AngelGate” affair is the willingness of entrepreneurs to believe the worst of the very people who have been working so hard to make starting companies easier.
Have people forgotten what it was like to raise money before the rise of the “superangels”? Searching desperately for angel investors, or trying to pitch VCs before traction?
Like Mark Suster, I sit on “both sides of the table”. I’m an investor, but I’m also an entrepreneur, and thanks to my work as an unpaid advisor, I might very well help an entrepreneur negotiate a funding round in the same day I’m negotiating one of my own investments.
Like any entrepreneur, I complain about the cluelessness of investors. Like any investor, I complain about the cluelessness of entrepreneurs. But even though we’re on both sides of the table, fundamentally, we are all on the same side. We want to change the world (and make money in the process).
I’d call on all the entrepreneurs who have been funded to make their voices heard–what do they think of the men and women they’ve been working with these past few years? While I agree with the point of view that this is a worthless sideshow to the real Silicon Valley, now that good men are being dragged through the mud, we need to speak up.
Angel, VC, entrepreneur–we’re all jerks at times. And even if we weren’t human, the fact that our interests conflict (investors want to buy as much of the company as possible for their money; entrepreneurs want to sell as little as possible) would cause friction. But the answer is to work to soothe those frictions, not exacerbate them.
As I’ve said before in a previous post, follow the money. Who benefits from all this? If you can answer that question, you’ll have a better shot at penetrating the real conspiracy.
(Originally posted as a comment to this excellent post by Mark Suster)
I feel like the online discussion about angel gate is unrepresentative of the general population of entrepreneurs. It's just that the level headed, careful thinking types realize they don't have enough information to draw conclusions, and they don't say much.
There is a low pass filter in effect and we're hearing from a vocal minority. So in that way I believe you're right that it could be helpful for those people to speak up. On the other hand I think we could all just stop talking about it, because for *most* people, this isn't an issue.
I'm trying to raise angel money right now and it's not changing a thing about how I'm doing it.
I don't know anything about the super angels — I DO know that as a potential entrepreneur I've asked you, over the course of the 4 or so years I've personally known you, about a half dozen questions on investments in the course of around 50 or so emails — and not ONE time have you been unwilling to help, offer advice, provide a devil's advocate, or otherwise point me in SOME direction. IF the super angels are anything like you in their willingness to do the same (and I can safely assume that since several of your investments have been with these individuals that they are) they're probably getting a bad rap.
just sayin'
Great post. Could you please expand on what you call the cluelessness of entrepreneurs?
Really? It’s good to watch anyone at last begin addressing this kind of information, although I am still not really sure just how much I agree with you about it all. I subscribed to your feed though and will certainly keep following your posts and possibly down the road I can chime in once again in much more detail. Thanks for posting though!
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acgourley:
Good point about the nature of TC commenters. I'm glad to hear that angelgate is more echo chamber than reality.
Paul,
Thanks for the praise! It's my experience that superangels are very dedicated to helping…whether or not that help is essential is something the entrepreneur must decide!
Arik,
When I talk about cluelessness, it's mainly the ignorance of how investing works. The secret to sales is understanding how your customer thinks. Investors are one of a startup's most important customers–entrepreneurs should seek to understand how investors think, then use that understanding to their advantage.
Chris,
Thank you for your reply. Perhaps you can wrote a post about this. My (little) experience with angels had taught me that every investor thinks differently and seeks different things. Some invest our of gut feeling, some want a full break down of the tiniest details. Some seek to diversify, some invest in only one space they are interested in. Other than trying to pick up what other entrepreneurs say about a particular investor (which biased one way or the other), what would you recommend as the best way to gain insight into how investors think?
Arik,
How investors make decisions does indeed vary wildly. However, all investors have a number of things in common. They are seeking a financial return, which means that they want to buy low and sell high. If they have limited partners, their motivation is to deliver a good enough return to be able to make money off the carry and raise another fund.
If you keep these principles in mind, you can better understand the motivations of the specific investor. A VC who is new to the partnership is going to act differently from a name partner. A VC fund that is near the end of its life is very different from one at the beginning.