The sourcing fundamental and how it helps angel investors determine focus activities

What a day to be alive and take another step towards fulfilling your dream(s). For the next five to six blog posts, we will explore several chapters of Amis’s “Winning Angels: The Seven Fundamentals of Early stage Investing,” which will include highlights on sourcing, evaluating, valuing, structuring, negotiating, supporting, and harvesting. As we explore each topic, we will BREAK THEM DOWN and see how angel investors apply these fundamentals to deal negotiations. In addition, I will insert some of my thoughts from the entrepreneurial mindset and see what gems we may uncover, caution I am a failed businessman so this should be interesting. Let’s jump right into it and as I always say … “Let me talk to you.”

Like entrepreneurs, angel investors must balance between quality vs quantity when it comes to deals and issues to manage. After reading a couple of pages, I see it plain as day, the player is the entrepreneur, and the coach is the angel investor. Within chapter 6, the book discusses the four sourcing activities, which include preparation, networking, visibility, and focus. These activities assist angel investors in learning how to acquire “good” deals, invest, and supposedly have fun. As an entrepreneur knowing there are individuals who possess cash and capabilities that can make my entrepreneurial aspirations come true, motivates me, but to see how much work goes into angel investing, drops that motivation meter. Within each activity there were some nuggets that did restart my entrepreneurial engine so let’s check them out.

Within the preparation activity, the book advice’s angel investors to have a one sheet on hand, join a networking group, and possibly reward this group. The recommended activities mirror those expected of entrepreneurs and business owners, which means at the end of the day we’re all in this together.

            When I look back at my first six months as a business owner, I didn’t even have a mission statement and wanted to have a business just to say that I had one. Within my first year, I had lost more money than necessary, invested time that could’ve been saved, and invested more emotion than common sense. I had surrounded myself with business owners and like-minded individuals but focused on their profit margins rather than practices. Another pitfall was being under the impression that businesses were self-funded and grew organically rather than being funded by outside investors. Now I can attribute these misconceptions to a lack of knowledge and resources, but at the end of the day, I must take responsibility and before you dive into something, you should see how deep the pool is.

            Another gem within the sourcing section was the “five-star entrepreneur” questionnaire, which informs investors of the type of entrepreneur they might be dealing with. As an entrepreneur, I can say question one, which was ‘How well do they listen?’ would turn most investors off. I go with my gut when it comes to business, but that won’t work all the time. Overall, this chapter taught me that I need to be cognizant of what type of angel investor I might attract and how they might perceive me. Well till next week, stay alert, stay hydrated, and listen to your heart.

Reference

Amis, D., & Stevenson, H.H. (2001). Winning Angels: The Seven Fundamentals of Early-stage Investing.

2 thoughts on “The sourcing fundamental and how it helps angel investors determine focus activities”

  1. I like it when you said “the player is the entrepreneur, and the coach is the angel investor” all I keep hearing when I read that statement is that you have to know your role. You made a lot of good points as it related to your own experiences and how they could and do correspond with the sourcing activities. I particularly liked the fact that you said you found out that it was a misconception that business had to be self-funded. It is a costly lesson I am still navigating. But as I mentioned in our interview interaction I look forward to learning so that I can make better decisions in the future and as you say “see how deep the pool is” before I dive into it. Thank you for sharing. All the best.

  2. Greg,

    I very much appreciate your use of personal storytelling in these blog posts reflecting on our test, “Winning Angels.” I find it inspiring that you share what went well and what you would have changed about your business ownership journey, so far.

    In this post, I particularly enjoyed how you worded, “I had surrounded myself with business owners and like-minded individuals but focused on their profit margins rather than practices.” For me, this observation translates to the Sourcing portion of our book (and to other sections, as well). Angel investors must not only look at profit (or predicted profit) when looking to make a deal, they must also look at practice when deciding to invest. Too, as you have articulated, the entrepreneur must look at their own business beyond potential profit, and must invest a great deal of thought into the practices… the culture … of what they are trying to build.

    Great observation.

    -Amanda

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