One day during office hours, a 22-year-old founder asked my opinion about taking $150,000 to start his company from a single investor. “Nice,” I replied, “tell me more.”
As he described the investor’s terms and conditions, his body language told me that the 50-plus year old, virgin angel, early retirement, corporate executive who wanted to install his similarly situated buddies as CMO, CFO and COO in his tiny startup, had failed to pass his unconsciously-applied micro tests.
In our 30 minute session, I offered my view that he should consider either changing the conditions or declining the offer. A couple of days later, he told he had passed on the money and asked, “What now?”
It was a cool idea so we rounded up a few other angels, gave him better terms, a little less money but a lot more independence, guidance, room to grow, contacts, experience in startup issues & solutions, tolerance of pivots and emotional support.
Eighteen months later, it was over and we closed it. That was 10 years ago and I think we would all do the same thing today.
Our team didn’t get him over the line but the other one wasn’t even going to get him on the field.
As hard as it is to find someone who will write a check, it’s even harder to have a counterproductive investor on your team. Spend your networking calories on finding that person, group or VC who will bring 10X the value of their dollars to your company. A great investor does that and prepares you mentally and professionally for your next round.
Micro testing can happen in just a few moments.
Do the lights go on when you describe your vision?
Do their follow up questions appropriately challenge you?
Do you admire them as a person and vice versa?
Do you feel uplifted or intimidated by them?
What does your gut say?
Part of the joy of this business is growing and learning from - and with - people you respect, trust and, yes, love. If you are fortunate enough to get someone to say yes, please finish the job and collect a few alternative perspectives to improve the probability of a good outcome.
Y’all are likely going to be together for a long time.
Tony Wilkins is an active, early stage investor and growth stage coach. Tony@StandingOaksVC.com
I heard a Warren Buffet quote once that made me laugh out loud; “I try to invest in [mature] businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.”
Early stage investing is as much about what to remember as it is what to do.
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