Stuck Between A Rock And A Hard Place: Angel Investing Dilemmas

Being an angel investor brings up all kinds of interesting dilemmas and it’s hard for me to know what to do, especially because so much of this is so new to me, and there don’t seem to be any accepted norms or guidelines as to how one should behave.

I’ve invested in a company which I think is making an extremely cool product, and I think the founders are very bright. I’m happy to support them, but the problem is that they don’t seem to see eye to eye with me as far as the business side of the company goes.

I’m not the only investor in the company, and there is a major difference of opinion between the way certain clauses in the term sheet are being interpreted by us (the investors), as compared with the founders.

This is creating lots of bad blood at Board meetings, and there seems to be a pitched battle between the founders and us.

The problem is that I love these guys on a personal basis. They are smart, and a creating a world-class product which could make a lot of a difference to lots of people! I’m happy to engage with them both personally as well as socially because I’m very supportive of their efforts.

However, when I put on my investor hat, I need to take a completely different perspective because I don’t think they are being fair to their investors. I feel they are misinterpreting the terms, and I can put that down to their naivete if I want to be charitable. But the fact still remains is that they’re being very stubborn, and refuse to listen to reason.

The Dilemma

This is where the quandary lies.

If I deal with them purely as an investor, then I really shouldn’t be talking to them at all, except during the Board meetings. On the other hand, if I think of them as being friends, then what difference does it make whether I think they’re dealing with me fairly as far as the business side of the company goes? Shouldn’t I still be supportive, because they’re doing something which is so cool, and I still believe in their ability to deliver?

After all, my primary intention as an angel investor is not only to make money – it’s also to become wiser.

And I do need to interact with founders who are smarter than I am if I want to fulfill this goal. And just because there are areas of disagreement, does that mean that I should not talk to them at all?

In Conclusion

The problem is that this kind of stance on my part may create a lot of confusion, not only for the founders but for my co-investors as well. They may get the impression that I’m trying to run with the rabbits, and hunt with the hounds.

I still haven’t resolved this problem, but I think personal integrity is paramount. I believe in treating everyone fairly, and being treated fairly. This is not something I am willing to compromise on, no matter what happens. I’ll let you know how this story evolves.

[This post by Dr. Aniruddha Malpani originally appeared on LinkedIn and has been reproduced with permission.]

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