Comments on: Angel Investing – The ‘Elevator Speech’ Antidote

By: Neil Lewis

Neil Lewis — Tue, 20 Oct 2009 22:27:37 +0000

Thanks Dr Smith II – this is really great advice.

I’ve experienced the wrong end of believing the spreadsheet – and not going into the detail of the assumptions that built the spreadsheet. The interesting discussions are always about the assumptions – and rarely about how much this enterprise will be worth in 3 or 5 years time. If you miss this point, you lose your money.

I also support entirely the ‘prove it’ first approach to business and investment. Even in the bible when Christ turned water into wine at the wedding, the water didn’t become wine UNTIL it was laddled out. In other words, to have miracles happen, you first take action.

Thanks for a great comment Neil. During my time on Wall Street I learned that you begin reading any financial statement from the back forward – start with the footnotes. One of my reservations about an elevator speech is that it contains no footnotes and some investors don’t follow up by verifying the details in the assumptions. You are totally correct – the only sure way to decide is by reading the ‘tracks in the snow’. It’s not the idea that matters – it’s the demonstrated ability of the team to implement and turn the idea into revenue and profit margins.

By: Dr. Earl R. Smith II

Dr. Earl R. Smith II — Fri, 13 Mar 2009 20:34:52 +0000

Sean, Good question – most of the time successful entrepreneurs tap into the three Fs – friends family and fools. It is far better to bootstrap until you can validate the value proposition through the generation of customers. Such an approach also demonstrates the ability of the team to monetize that proposition. There is an article on my website titled Customers as Financiers. That is one example. If you go to angel investors too early in the process, you end up with a very low valuation – and that costs you significant equity in the company. Chief

By: Sean Peel

Sean Peel — Fri, 13 Mar 2009 18:04:20 +0000

I found this insightful and thought provoking. It makes sense to me that as an investor you should be looking for substance not flash and that the company should be built around have people who have a record that shows they can get it done.

However, as someone who has just started a company to take IP out of a University so we can develop and ultimately commercialize it I am curious what you would advise a comapny several years away from having a product or revenues that needs to raise money.

In points 4, 5 & 6 you would appear to be advising investors to avoid situtations where the company doesn’t have a product, doesn’t have revenues and that maybe even in a situtation where they have to get through several rounds of funding based on achieveing key milestones.

Where should they go to raise money, are these not often the people who are advised to seek angel investors ?

Appreicate your thoughts

Sean

By: Mark Hendy

Mark Hendy — Fri, 06 Mar 2009 18:45:37 +0000

Very well written. The point is clear. Keep it simple and give me facts not hypotheses. I’ve been to many companies where the local management team is suffering paralysis by analysis. Plan after plan is drawn up but no action follows. A plan that’s not implemented is a waste of time and money and does not serve the shareholders well. Don’t get me wrong, I’m not advocating no plan, but once the plan is drawn up – Do it.