Good Ideas Do Not Need Angels

Posted by Pierre de la Fortune on June 19, 2015 @ 12:01 a.m.

Written by Andrew J. Birol

Recently I have read or overheard several discussions on angel investors and why there are not enough of them in the region. This discussion usually turns into the lament of why high tech and Internet businesses have such a tough time getting started.

Ever since the dot-com crash, more and more bootstrap, kitchen table entrepreneurs are turning to "angel investors" as their best source of financing. The rationale is that since the angel was once a struggling young lion himself, he or she should have a more lenient financial heart than that of a venture capitalist or banker. And with the return to sobriety among professional investors in dot com and other high tech companies, it is true that the purse strings of the mainstream financial sources have significantly tightened.

For many up and coming business moguls, angels have effectively served as their "Daddy Warbucks". But sometimes I wonder if angels are being exploited less for the right reasons and more for the wrong reasons.

The right reasons are clear. Startups have little collateral, marginal credit histories and often bring bigger ambition than track records to the bargaining table. Banks and venture capitalists are in no position to entertain these individuals and, if they do, create conditions far too onerous for most to bear. So it is the angel who steps in with vital seed capital, the lifeblood of a scrappy start up.

The wrong reasons angels are in demand are more disturbing. Maybe the latest business plans are not passing muster in the established investment community and angels are more susceptible to marginal ideas. Lately I have heard some of the most ridiculous business plans and ideas being floated around at networking meetings, made ever the more outlandish by adding the "dot-com" suffix to the end of the company name. For some examples just attend the next networking meeting or keep reading the local business papers.

So rather than beat the bushes for new and more benevolent angels to fund their unfundable business ideas, I wish entrepreneurs would adapt the same three rules when creating new ideas as we have all used in hiring employees. These are.

1. Can They Do The Job? Will the business plan actually create unique value that someone really needs? 2. Will They Do The Job? Does the management team have the skill and fortitude to execute the idea after creating it? 3. How Will They Do The Job? Is the value proposition of the new business structured in a compelling way that makes its success plausible?

If a business plan and the entrepreneurs behind them would follow these simple rules, there would not be a shortage of angels in Northeast Ohio, or America for that matter. Blaming the marketplace for the failure of a new product or business is the oldest excuse in the world. Perhaps these entrepreneurs should ask themselves this hard question. "If I become a millionaire and can serve as an angel to the next generation of entrepreneurs, would I invest in my own idea? I am afraid their answer might be too tough to take.

Copyrighted by Andrew J. Birol, President of Birol Growth Consulting, who helps owners grow their businesses by growing their best and highest use. Andy can be reached at 440-349-1970, by email at abirol@andybirol.com, or on the web at www.andybirol.com.

For more info please visit: http://entrepreneurs.about.com/cs/financing/a/angelsnotneeded.htm

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