A theme that has been running on iBusinessAngel is that it is possible to form intelligent strategies and due diligence processes around angel investments.
The corrolory of this, of course, is that starting up a successful business has to become more science and less art.
This view was admirably expressed by Nic Brisbourne in his recent blog ‘its is getting easier to startup’.
He lists Steve Blank and Eric Ries as key contributors to this as well as quotes from Marc Andreesen’s interview in the WSJ where he said
“I think entrepreneurs are getting better and better,” he said, “better educated, better trained, better informed, better networked”
So, is the same happening to the Business Angel sector?
In the Business Angel sector, angels who like to be involved in startups are engaging with accelerator programmes or setting up and running one themselves.
This has a few advantages
- the business angels get to know the teams over 10 or so weeks – to see if they can resolve problems and challenges and keep moving forward
- the idea gets formed by real market experience (hopefully) and therefore becomes established or de-risked. Of course, if this doesn’t happen, then the idea – no matter how good – doesn’t get backed
- the business angel build relationships with the management teams so that the entrepreneurs themselves understand what the angel brings
This method of engaging de-risks the investment for both parties – the entrepreneurs swapping equity for cash – and the business angel swapping cash for equity.
And, an investment process which is de-risked is easier to understand and therefore has a greater chance of going through.
Hence, the more intelligent business angel strategy is actually very simple – get to know your investment and the entrepreneur team, it is the best way to de-risk and deliver a paper ‘lite’ due diligence process.
So follow your exec team for a bit – before you hand over your money. A startup accelerator programme is a great way to do this….