The hardest part about being an entrepreneur is waking up every morning with the same passion for the business as you had on day one, knowing that you'll hear no more than yes, have more downs than ups, work harder each day for unknown returns, and that life would probably be easier, though not better, if you just took a regular old 9-5 like most everybody else.
If you can manage all that, then you know being an entrepreneur is for you. The reality, however, is that most people can't stomach that and will ultimately spend their lives seeing others act on ideas they may have had themselves.
Starting a business is risky, we don't all have the guts
Fortunately for some, there is a middle ground in the form of angel investing and venture capital that gives investors a chance to be a part of the entrepreneurial journey in varying capacities.
Below we look at the two extremes of how involved an investor may get when investing in a startup.
The active startup investor
Some Angels, and many VCs, can offer more to the company than just capital. In their years in industry, and in investing, they're likely to have built their networks out, and their skill set as well. Often times these larger investors will look to become a non-executive director of the business they've invested in to further be involved in the company (non-execs sit on the board). These are the things a strong, active investor or non-exec can bring to the table, and things these investors get in return.
What can active investors bring to the table?
- Networks: suppliers, distributors, subject matter experts and, most importantly, other investors
- Knowledge: If they are an experienced investor or entrepreneur themselves they will have plenty of experience to learn from
- Ears: sometimes as an entrepreneur, all you need is someone who will listen to you.
What do active investors want in return?
- A true sense of being a part of the business as their input can help, or hinder, the companies growth
- An insight into what it's like to be part of a startup
- Compensation. Some Non-execs wish to be paid for their time
The passive startup investor
Given the rise of crowdfunding and ICOs there is a growing audience of passive investors dipping their toes into the startup investing space. While passive investors, as the name suggests, are often happy to invest and then sit back and watch how things go, there are some additional benefits startups can get from passive investors, and benefits the investors can get from the startups, beyond the capital.
What do passive investors bring to the table?
- Validation of what you are doing. They wouldn't be investing if they didn't believe in the business
- A sounding board on call. Reach out to them for feedback or calls for expertise and you'll be surprised at how many will reply when asked. They might not be looking to be involved in the day to do but they will help when asked.
- A wider source of capital for future raises. So long as investors are kept up to speed and things are going well, an existing investor base is the best starting point for future raises
What do passive investors want in return?
- A (smaller) sense of being a part of the startup and its growth. While they may only be involved so much as receiving the company updates, their early involvement makes them feel more connected to the growth than investing in, say, Coca-Cola
- A badge of honour in taking the risk to back a company that could have a positive impact on society as a whole
- A story to tell at the pub. Investing in startups is very much a trendy thing to do. The rise of the celebrity investor, Ashton Kutcher, Jessica Alba, Michael Jordan, and others, have made it worth discussing amongst friends
These are obviously just a few observations from my time in the space. I would love your feedback on what I've shared or any of my articles or even what we are building over at https://www.syndicateroom.com
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