So you’re out at an event and someone starts chatting you up around the free pizza table… You talk about yourself, but you’re careful not to talk too much about yourself. (You’re sensitive to that sort of thing and don’t want to come off too “full of it”…). You ask your new friend about themselves. What they do. What they’re into. What they’re looking for in a relationship. They smile, you smile back. Seems like things could get interesting…
Just because that cute girl or hunky guy at the bar is making eyes at you, doesn’t mean you should take them home without getting to know them a little better.
THE SAME RULE APPLIES TO ANGEL INVESTORS.
Angels will be among the first people you meet who are looking at your startup as an attractive investment opportunity. Take the time to get to know them before you start signing on the dotted line of the term sheet. (Actually, the lines aren’t dotted any more… somehow the expression still sticks though…). Just because someone is ready to throw some money at your startup, it doesn’t mean you need/should take it.
Your investors are with you for the medium to long term. They’re going to ask for certain rights in their term sheet. They’re going to ask you and your startup to perform certain obligations. And in exchange, you should be asking for more than just money. Good mentorship in the early stages is paramount. And in the era of crowdfunding and alternative financing opportunities, mentorship is probably more important than the money itself. So make sure that your angel is the right “fit” for you.
How do you know what makes a good fit? It’s the same as any other relationship. Do you communicate well together? Do you have similar interests? Do you dedicate enough time to one another? And by the way, just like any other relationship, it takes lots of hard work to make it a success over the long term. If the plan is to take the money, issue the shares, and have a few meetings and then never speak to one another again, you’re wasting your time and theirs… Not to mention giving up valuable equity which could be put to better use with a more appropriate investor.
So, word of advice: Date your Angel. Put your best foot forward, and demand that they do the same. You each owe it to yourselves before going any further down the rabbit hole.