Justin Whitston, the founder of VentureLab, has taken considerable exception to my blog post from the other day, entitled, “The Insanity of Angel Investors”. He carefully reviews my points and disagrees with many of them. I shall, in a moment, try to reply thoughtfully to his comments.
But first I want to reply to his over-arching view that in writing a “sensationalistic” piece, I am harming the environment for angel investing itself. Clearly, I don’t think so or I would not have written the piece. But more to the point, Justin and I have had different experiences. He has clearly encountered many angels and I have run into too many to count.
Every behaviour I describe is based on multiple instances of angels doing as I described. And I think it is wise for people to be inoculated against such behaviours. Some of them are difficult for young entrepreneurs to understand.
This doesn’t mean that I dislike angel investors; to the contrary they are one of the most important types of funder in the eco-system. And to Justin’s credit, and from what I observe from a distance, his approach at VentureLab reflects much of the best practice one will find anywhere.
But Justin, the world is a very diverse place and if you are offended at the fee earners (See Here) then you shouldn’t take offense when I call out some of the other behaviours which I have seen over and over again.
Interestingly, we share a similar indignation when we see similar behaviours. I also have written about fee earners (Justin’s term) and I employed, I’m afraid, similar bombast then. But I have also written more broadly about angel investing, venture investing and the cost of money. Justin, the headlines alone will probably make you cringe: Sex, Lies and The Bottom Feeders of the Angel Community , The Price of Money: At Least You Can Eat Catfish, What Angel Investing and One Night Stands Have in Common, The Price of Money Part 4: Say No, No, No Till Your Tongue Bleeds.
I look forward to your thoughts on these pieces too…I think.
Meanwhile on to the meat of the issue.
Justin disputes my statement that “by the time you reach an angel investor you have something to show for yourself”. Venturelabs notwithstanding, that is perfectly correct. The angel in the UK is rarely or never the first stop for a startup. That dubious privilege is reserved for friends, families and fools. The entrepreneur is foolish to show up with merely a gleam in their eye and a great story. By definition, an angel is a stranger who is looking for a potentially profitable opportunity in which they can invest their time, their connections and their money. If you have nothing to show then you are likely to be too early.
That doesn’t mean that you have the complete package, team, product, revenues, traction etc.. It just means that you must have some evidence of customer demand, market size, sustainable advantage…something that I can hang my hat on.
My next comment that angels are insane is an exaggeration for effect…please let me modify the statement Justin, “Many angels that I have met are nuts, not all angels are insane and it may be that I attract crazy people which is a dire reflection on me and Justin only attracts really nice shiny clean angels and thus I envy you” Sorry Justin I love sarcasm.
I also said that some Angels will give “you stupid advice based on complete ignorance and they’ll be cross when you don’t take it.” This is part of my inoculation theory, that we should empower entrepreneurs who might otherwise be far to biddable when someone far more experienced gives them advice that simply doesn’t apply anymore or is from a different industry. As the founder of the business you must accept that you are an adult and they it remains your responsibility to be a critical thinker and a reflective decision maker. Advice from an angel is merely advice and as I have seen, much of it is not worthwhile.
Actually, Justin disagreed with so many points that I don’t have the energy to rebut them all but let me jump to one that suggests the real issue here… I pointed out that many, if not most, angel deals fall through. Justin says, “Entrepreneurs need to be educated how to move onto the next one when one does. Maybe a good seminar for the school for start-ups instead of scaremongering young start-ups with kind of attitude.” Justin doesn’t disagree with my point, that most deals fall through, merely with my approach to presenting it.
I’m afraid this is where we part company. Over the last two years I have taught more than 7,000 people face to face and one thing has become clear: if you do not say it with emphasis it doesn’t punch through the noise. The lure of shows like Dragons Den paint a somewhat distorted picture of the real world. My article was not intended to scare people off angels, but to put them on guard. I have heard horror story after horror story about fee earners and worse. I am dealing with one right now which will someday see the light of day.
Justin, you cannot imagine the number of ways that people abuse the trust of novice business people and early stage entrepreneurs. I applaud your willingness to speak out and your concern on their behalf.
My sense of humour and my penchant for hyperbole may not be to your taste but we are that rare pair of angels who are on the same side and I suspect in violent agreement.