I recently talked with a fellow veteran who once appeared on Shark Tank several years ago. The Air Force veteran shared with me some business tips and talked about how she took all her life savings and bet on herself. Time and time again, this has been my approach to how I envision growing my company, but as I continue to read Amis’s “Winning Angels: The Seven Fundamentals of Early-stage Investing,” I’ve come to realize that all I might need is the right investor so let me talk to you. As we dive into the next chapter, we’ll shift our focus to one of my favorite words … negotiation … so let’s “break it down.”
The book says there are four fundamentals when it comes to negotiating: structure, price, amount of capital that will be invested, and role. There are many factors for angels to consider when entering negotiations as they will impact each of these fundamentals differently. As an entrepreneur, I must take these fundamentals into account as I’d want an investor who would feel comfortable with the structure of the deal and overall price rather than the investment role they would have. Chapter 37 also provides insight into the possible attitudes of angels who don’t want to negotiate. It’s also helpful to learn about the attitudes of “silent angels,” as I never thought of that type of investor.
Within the chapter, there lies a wish list for angel investors to include low prices, entrepreneur salary limits, pre-IPO investment opportunities, advisory or coaching salary, anti-dilution rights, etc. As I went down the list, I thought of what items angel investors could have scratched off with my first business, with the conclusion being none. Why? Well for one I didn’t have a business structure, two, I had little to no items an investor and I could negotiate over, and three I wasn’t looking for any outside investments. There were two things, investors could’ve negotiated which would’ve been multiple exit opportunities and no reputational risk because I didn’t even market my brand out there for people to know what my business was.
As the chapter closes, the reading gives us insight into interests, issues, and positions that must be seen from an investing and entrepreneurial standpoint. When an investor’s and an entrepreneur’s interests differ, communication is most important. It’s okay for both parties to be selfish, self-serving, and a bit bullish, but everyone needs to lay their cards on the table to avoid a toxic relationship. As a failed businessman, I can say even though my ventures failed, my relationships are still there. As I continue to build the Gimeez brand, I will hopefully enter an agreement with someone (or a group) with individuals who are easy to talk to, map out terms that work for the both of us, and finally would be excited to grow together rather than be here for a quick minute and bounce.
Reference
Amis, D., & Stevenson, H.H. (2001). Winning Angels: The Seven Fundamentals of Early-stage Investing.