I can get away with a headline such as this one as I am an angel investor. And not just any angel investor, but one that has the dubious distinction of being labeled as one of India’s top 15 angel investors for 2013. With that preface, or should I say disclaimer, let me proceed with my rant!
“Angel” Investors, Really?
A large proportion of angel investors are guilty of all the following:
- They actually like saying, “I am an angel investor,” then pause; hoping that the listener would break into spontaneous admiration.
- They summarily reject an entrepreneur’s idea without understanding it.
- In those rare cases when they do attempt to understand the idea, they seem to have no alternative but to map it on to another idea that they had earlier come across (“Oh! So you are like Facebook Events with a Maps feature!”)
- If they are asked for advice, they always give it — even if they lack the most rudimentary understanding of what is being discussed. Somehow they never learned to say, “I’m sorry I have no idea!”
- In the term sheet, they want to reserve every possible right that can be conceived. Yet, they do not spend time reading their own term sheets well. As a result they end up in sticky situations down the line.
- They treat a board seat as either a God given right, or as a trophy that makes them look sexy.
- In panel discussions they talk about the insignificance of “valuations” as an investment decision making criterion. But during valuation discussions, they negotiate endlessly.
- One way angel investors sell themselves to entrepreneurs is by promising them value in addition to the money they will invest. Upon investment, this value is usually nuisance value.
- Every angel investor has woken up one fine day and decided that they wanted a status report of some kind. Since the entrepreneur is swamped and unable to give the unscheduled report immediately, the angel investor gets nervous and sets up conference calls and meetings — thereby worsening an already bad situation.
- Very few of them actually make money. They know this, but they have not started calling themselves “angel hobbyists” yet!
- The most fun are those angel investors who act as a pack, also referred to as an angel network. This is one of those few examples where the more the number of otherwise great people that come together, the lesser value they cumulatively create.
[Disclaimer: All my angel investor friends who are reading this article, are exceptions to the above. They are fabulous people, and you should reverentially bow down to them every time you cross their path. And you are not allowed to snigger when you are bowing down.]
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