Supporting where your investment goes and harvesting the returns

Oh yeah, let me talk to you because the NBA Draft is over, football camps are still in the middle of their OTA’s, and my NY Yankees ….. let me stop there. As always, I hope you’ve had a wonderful week and this will be our last review of Amis’s “Winning Angels: The Seven Fundamentals of Early-stage investing,” which has been insightful and oh-so educational. Take a preverbal walk with me as we discuss how investors can support entrepreneurs and how they can “harvest” their investments. Of course, I will apply my failed businessman lens and reminisce on the past to shape my future. Let’s break it down, folks.

            As we get into the early part of the chapter, we start to learn about the five participation roles including the silent investor, reserve force, team member, coach, and controlling (lead) investor. I compare the participation roles to setting the heating mode for an iron, and how hot will the investment relationship gets. As I read through the roles, the two that stood out to me more were the roles of the team member (investor) and coach. The team member investor has a high to negative impact while the coach stays on the sideline and provides support as the entrepreneur needs. When I started my business, I sought “coaching” from other entrepreneurs, but not an investor who would’ve probably provided a different set of advice.

            Delving deeper into the support chapter, we start to read about the four types of start-ups including a product business, service business, retail business, and e-business. You might guess what type of business I’m currently running … I mean you’re reading my blog, but seeing these types of business from an investor’s view is different. As we read about e-businesses from an investor’s view, we take six items to account which include the e-business concept, build site, hire team, strategic partners, raise marketing capital, and attain critical mass. The one sentence that scared me was, “Raising $10m+ of marketing capital may be necessary for success.”

            Moving on to the harvesting chapter, we start to read about the summary of harvesting methods, including walking harvest, partial sale, initial public offering (IPO), financial sale, strategic sale, chapter 11, and chapter 7. Within the chapter we learn about different variables, including timing of cash payment to investors, the certainty of pulling it off, ongoing role of founder, costs, etc. As someone who self-funded 100% of my business activities, I had to ask myself, “if someone were to invest in my organization, would these variables work in their favor?.” From a reality standpoint, sadly, the investor would just be dumping cash into a venture doomed from the start.

            Finally, near the chapter’s end, it notes how to get venture capitalists involved. This portion outlines eight hit marks, and the two that grabbed my attention were simple structure and a hot area. You see Gimeez resides with entertainment news, which will always, and I mean always, be around, so that takes care of the hot area. As far as structure, I know when to bend and when not to bend (I’m also open to kind suggestions), so structuring and adaption are too easy. In conclusion, this was a great read, and this book provided invaluable insight to me as an entrepreneur, so if you have $50k lying around, well, give an investment a shot.

Reference

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