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Angel Investor Non-Admissons: 10 Things They Won't Say

Posted by Dharmesh Shah on Mon, Jun 15, 2009

 


As a tribute to the very funny VC Non-Admissions and the follow-up Founder Non-Admissions, I offer to you my own take on this — from an angel investor perspective.  Sorry that mine aren’t in a cool presentation form with pictures and such.  I don’t have that kind of talent.  OnStartups Angel Non-Admissons

10 Things An Angel Investor Will Never Say

1. I really want to support entrepreneurs — but just those that are going to make me money.

2. I dread having to explain your business idea to my spouse (who can veto any deal).

3. I don’t really have enough stake in your company to spam my network on your behalf.

4. I was lying when I said that some of my best friends were VCs.  Even VCs aren’t best friends with VCs.

5. I have no idea what the hell you’re talking about 50% of the time.  What’s a socially-semantic mobile platform for non-virtual currency mean?  (Oh, it’s an iPhone/Facebook payment app).

6. The other 50% of the time, you have no idea what you’re talking about.  Anti-dilution provisions in a termsheet are not about beer.

7. How the public market did last week does impact my decision making.

8. I like to invest in cool startups because it helps make up for high school.

9. I don’t understand what half the things in the funding agreement mean either, but I’m betting that most of them are to protect me, not you.

10. I really didn’t put the check in the mail the day I said I did.  I was golfing that day.  I sucked.

11. I’m in it to mostly have fun.  If I wanted to do unpleasant work, I’d have my own startup.

—-

Feel free to add your best ones in the comments section, or if you prefer, you can tweet me @dharmesh



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How To Watch A Startup Presentation

Posted by on Mon, Aug 07, 2006




This article is in response to an excellent article Paul Graham posted recently titled “How To Present To Investors”.  If you are the founder of an early-stage startup and expect to pitch your company to angels or VCs someday, I highly recommend the article.

Paul’s article was motivated in part by the fact that Y Combinator (the early stage investment firm in which he is a partner) is hosting an event called “Angel Day”.  On Angel Day, the current crop of Y Combinator  startups (companies that he and his partners have funded recently) will be pitching to a group of potential investors.  I’m scheduled to attend this event, as one of those potential angel investors.

Having been on both sides of the fence (heard pitches and given pitches), I have come to realize that many articles have been written to provide advice to entrepreneurs on how to make effective pitches to investors.  What hasn’t been covered much is the reverse:  what investors should do to maximize the value they get from startup pitches.  Hence, this article.  To keep myself focused, I’ll pretend I’m writing to other attendees of the Y Combinator Angel Day presentations.  However, most of these tips should apply equally well to other similar situations.

How To Watch A Startup Presentation
 
  1. If You’re There, Be There

 
Nothing surprises me (or irritates me) more than having people attend a startup pitch and them mentally “check out” within minutes.  A popular activity is checking email on a Blackberry.  Assuming that this activity is not intended to convey some sort of importance (I think most investors are not that insecure), I can only guess that this comes out of a force of habit and a short attention span.  My advice:  If you thought the meeting was worth your time to go, you are being inefficient if you’re not engaged.  Even those with the best pattern matching algorithms in the world need some inputs into those algorithms.  If you’re there, be there.  You’re wasting your time otherwise.
  1. Learn Something

 
It is entirely possible that the pitch you’re hearing is of absolutely no interest.  It may be an idea that you don’t like, a category that you’re not interested in, etc.  However, I think it’s important to remember that the best startup founders have spent a lot more time thinking about the problem.  In the case of Y Combinator companies, they’re not only building products to solve a problem, they are likely part of the larger target market.  These are the early adopters and people keeping their pulse on technology.  As such, there are lots of important things to learn about the state of the industry and where things are headed.
  1. Keep Things In Context

 
I’ve seen a number of startup pitches where someone in the audience asked one of the standard questions.  The most common being:  “That’s great, but how are you going to make money?”.  Though business models are certainly an important factor, in the first pitch (and particularly in a format like the Y Combinator presentations) it is unlikely you’re going to get a thoughtful and productive answer.  So, unless you’re there purely to rationalize why this is a terrible startup and why you’d never consider putting money in – try to remember the limitations of the format and context.  If you have to ask questions, ask ones that will actually tell you something useful.
  1. Focus On The Problem And The Solution

 
Many startup presenters have little or no formal experience pitching to anybody – let alone a group of smart but cynical investors.  So, don’t judge the quality of the startup based on the polish of the presentation.  In fact, at this stage in the game, if the pitch is really, really polished it could be a mild signal that one or more of the founders cares more about the pitch than they do about the problem.  I tend not to penalize startups for having good presentations, but it’s also important not to penalize them too much for having mediocre ones.  Let the passion for the problem shine through.
  1. Give Back Something Useful

 
Many startup founders (particularly the Y Combinator ones) are early in their careers.  They’re working hard to solve a problem they care about.  The ones I have met are genuine entrepreneurs.  Though you may or may not like the current idea, I think it is important to support those pursuing their dreams and taking the entrepreneurial leap.  Be candid, but be constructive.  These are really smart, hard-working people willing to listen and take input.  Though the investment may not make sense for you, it doesn’t mean that you can’t help in some way.  If you’re an angel investor, chances are that you were in their shoes once too.
  1. Be Courteous and Polite

 
This is likely going to be the most controversial item on the list.  Many investors need to remind themselves that startup founders are people too.  (Though in some cases, I think investors don’t discriminate – they’re equally discourteous to everyone).  I’m not sure why, but I’ve found that people investing their own money (angels) are usually more courteous and polite than those investing other people’s money (VC) – but that’s a topic for another day.  

I look forward to seeing the Y Combinator companies later this week.  If you’re one of the startups presenting – or one of the investors attending, drop me a note. 



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