Angel Investing is like a taxi ride

In the confusing microcosm of Silicon Valley, it’s more common to find someone who is an “angel investor” than someone who owns a bicycle. Angel investors, by definition, provide a small amount of their own investment funds to back companies that give companies a financial lift in a taxi. Few people understand one thing: to get into a taxi, you need to be prepared, know where you are going and when you think you will get off.

So, financially, to access angel investment, you need to:

1. Get to the taxi: must be able to walk on two legs or with the aid of a device. We don’t invest unless you have an established company, a taxpayer ID, a specific product or service, a prototype or a specific set of promises, some form of market validation (sorry your friends don’t count). We don’t take crawling babies without parents, but we do take babies with parents and call it a turn. And yes, both children and parents get off at the next stop.

2. Carry a wallet. Have a skin in the game. The best way to put it into perspective is this: If you’re not going to take the risk, I’m not taking it for you.

3. Speak the language. In order to understand each other, we must speak the same language, and in many cases that means that the financial language must be understandable to you. Oh yeah, and the business language and the implementation language. You don’t need these languages ​​to apply for some jobs, but if you want to be an entrepreneur, you need the language to get hired.

4. Have direction. It is very important to know where you are going and how to determine that you are on the right path. Yes, there can be accidents, but you can make a plan B on the spot if you know where you are going. It also helps if you know the route, if you’ve done a similar route before, or if you have travel advisors who can check. Or you can ride with others and everyone wins.

5. Get some guidance. You may know the route, the destination and the starting point, but we are in the business of transportation. We are in it day in and day out and know when and where there is traffic, bottlenecks, stop signs and boarding areas. We also know when it’s best to take off, run and walk. And we know what has or hasn’t changed since the last time you rode.

6. Plan your exit. Taxi needs your space to carry more passengers. At some point you will need to log out. I once said that the best description of an angel-investor-entrepreneur relationship was this: How can we be apart and be happy spent together? This is one of the most interesting opportunities to create something in such a loss-making structure. Angel investors invite entrepreneurs into their taxis at the expense of other trips, they spend time and resources together, expecting financial and emotional rewards. We want to feel good about getting you from here to there. Entrepreneurs also have to choose who they travel with. You can’t ride a bike to the moon, but you can enjoy the ride in a different way, and you NEED that taxi to get you to the shuttle landing site, to the airport, to the train station, to the port.

Thinking of Angel Investing as a timed vehicle helps you manage this funding mechanism, but if you want to fund your company, whether it’s a small company or a startup, there are many other ways to do it. Don’t limit yourself to thinking that angels are the only way to fund a company. Sometimes there isn’t, and sometimes there isn’t even a better way.

Having an angel invest in your company does not determine your success.

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