October 23, 2012

Every profession has them; Black Sheep, Bad Actors or if you prefer.... rascals, miscreants, scum bags, slime balls, or douche bags. You find these douches in every walk of life like politics, business, entrepreneurs and yes.... even Angel Investors.

I'm an angel investor. I have made numerous investments in the past year…. I think that’s what makes me an angel investor.  Yet as I hunt for deals, listen to pitches, meet with startup founders seeking funding, I sometimes encounter the douche's of my ilk. The pretend angels... the angels in sharks clothing; the PretAngels.

They dress like Angels. They walk like Angels. They quack like Angels but they smell like skunks.

Not every person in a group of Angels gathers at funding events to invest in startups. Some very few bad-actors are there to pretend they invest. They take advantage of an entrepreneurs need for funding, thier insecurity and/or greed and then extract cash or equity in exchange for advice, access, or influence.

They'll pretend to be investors. They'll set up follow-up meetings and then they'll pull their bait and switch. So my advice for founders seeking funding, if you don't have time to waste, check out Angels seeking your audience. Don't let the excitement of finding a possible living and breathing investor overwhelm your good judgment. Do you're own due diligence.

How? Ask them, “What investments have you made in the last few years?” If the answer is none, then it’s okay to ask them why they have picked you as their first. Every investor has to make their first investment sometime. Do you trust them? Do their answer makes sense? What do you lose by taking a chance?

If their answer is yes, ask if they invested cash, how much do they invest, and ask for contact information of the funded CEOs. You can bet a real investor is going to get references on you…. why don’t you act like someone who’s offering a valuable opportunity, the opportunity to invest in your great company, and check our references.

  1. Get references of portfolio companies.  If you asked me if you could talk to CEOs with whom I’ve invested, I would be happy to give you references.  I want the founders who I fund to be selective with whom they’ve associated. I want them to be picky. 
  2. Look them up in Angel List. If they’re not listed, that doesn’t mean the are not legitimate investors.  If they are listed that does not mean they are. There are people listed as investors in Angel list, with 3 or 4 or 5 investments who have not put cash in any company.  It’s not the ultimate resource but it’s a start.
  3. Google them. Duhhhhhh!
  4. Ask around.

So here’s my deal…. yes….. some of us in the Angel ecosystem suck. And Yes I know that I can be an Ass sometiems too (and I know that a bunch of you just said sometimes? How about all the time) but I earn that status on my own. I don't mind earning my negative monikers.  I don't want to get painted with the douchie brush of a PretAngel… so if your raising money in the DC region, go ahead and email me and I'll tell you what I know.  I’ll tell you if I know if they are a straight up investor, or if I don’t know, or I’ve have my doubts.

I encourage you to go public and out the PretAngel when they've wasted your time pretending to be something they're not.

Lastly, be careful who you let on your cap table. Give equity to a PretAngle and you'll wind up with a Crap Table. I look at a company's advisors and investors and decide that I don't want to be associated with those folks. I know, I know there are probably bunches of folks who don’t want to be associated with me.

So don’t ever agree to give equity or business to a pretangel. You and your company will be judged by the company you keep. A person who gets access by pretending to be one thing and winds up being another is a douche. You don’t want douches on your board, in your employ or on your cap table.

So I apologize for the douches hiding in my angel cattle herd. There are bad apple's in every barrell.... even in Congress so I'm told.

posted in category Capital Markets

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