Cameron Chell here again.
On Saturday, we chatted a bit about how to dig beneath the surface of a startup to understand what’s going on before you make an investment.
I always recommend asking sales-related questions of the founding teams first, because these types of questions will always bring everything else about the business to the surface.
(You can read up on those questions here.)
There are multiple ways to do this, but personally I like to start by keeping a journal for each company in my portfolio.
Regardless of whether it’s a passive investment or an active investment (one where I’m actively helping to drive creation within a company), my strategy is still the same:
I’m not doing this as a fact check mission, but rather, as a way to understand patterns and problems.
I’m really trying to read between the lines, identify patterns, and then (if appropriate), relay those patterns back to the managing team, the entrepreneur, or the founder. Moreover, I’m trying to determine if I can add value, if I should look to participate in further rounds, or if I should cut my losses and abandon the venture entirely.
It’s at that point that I can go back to a founder and simply have a conversation about my observations.
These observations are based on data and information they gave me… not my own assumptions and judgments.
This lowers the potential for them to be defensive, and instead opens up a dialogue that may be productive for the company.
The founders you work with are the ones who have poured hours of their time into this venture. As an angel investor, you’re there to be supportive.
The positive and supportive energy you put into a startup as an investor is what will encourage its team and help you build trust.
You’ll be a productive shareholder that can hopefully contribute back into the organization.
In other words, I’m not trying to be right in my questions.
Instead, I’m always trying to add value.
The observations I share, compiled over a longer period of time, are more valuable than any type of harsh questioning or unnecessary advice I could give.
Understand where you can add value. Don’t over-add. And definitely don’t be intrusive.
If you’re asking the right questions and just trying to be helpful, you’ll stand a much better chance at increasing the valuation of your investment.
That’s all from me for now, but I’ll be back shortly with even more insider tips. Stay tuned!
Talk soon,
Cameron Chell
P.S. By becoming an angel investor, you could be one of the first to invest in the next Elon Musk, Steve Jobs, or Bill Gates company… all with infinitely greater upside potential. Today, America’s favorite VC is walking you through his formula for finding these potential unicorn startups and proving that anyone can transform their lives with as little as $100 within the next year. Catch the event transcript here.
On Saturday, we chatted a bit about how to dig beneath the surface of a startup to understand what’s going on before you make an investment.
I always recommend asking sales-related questions of the founding teams first, because these types of questions will always bring everything else about the business to the surface.
(You can read up on those questions here.)
However, it’s important to keep in mind that as investors, we should carefully toe the line between asking the right questions and asking too many questions.
Once you make an investment, you should make sure you’re adding real value to your portfolio companies, rather than just interrogating the founding team.There are multiple ways to do this, but personally I like to start by keeping a journal for each company in my portfolio.
Regardless of whether it’s a passive investment or an active investment (one where I’m actively helping to drive creation within a company), my strategy is still the same:
I always come back to those same sales-related questions.
I keep the journal, because when I ask the senior team or other people within the organization the same series of questions over and over again, I’m able to discern details.I’m not doing this as a fact check mission, but rather, as a way to understand patterns and problems.
I’m really trying to read between the lines, identify patterns, and then (if appropriate), relay those patterns back to the managing team, the entrepreneur, or the founder. Moreover, I’m trying to determine if I can add value, if I should look to participate in further rounds, or if I should cut my losses and abandon the venture entirely.
I don’t tend to offer a lot of advice in my questioning. I just take notes.
But after getting a journal that’s well-populated with notes over a number of months, I can start to see a few patterns.It’s at that point that I can go back to a founder and simply have a conversation about my observations.
These observations are based on data and information they gave me… not my own assumptions and judgments.
This lowers the potential for them to be defensive, and instead opens up a dialogue that may be productive for the company.
Ultimately, it’s important to understand that as an angel investor, you’re not there to grill management.
You’re not there to see if they’re lying, and you’re certainly not there to test their metal.The founders you work with are the ones who have poured hours of their time into this venture. As an angel investor, you’re there to be supportive.
The positive and supportive energy you put into a startup as an investor is what will encourage its team and help you build trust.
You’ll be a productive shareholder that can hopefully contribute back into the organization.
I’m also always conscious not to overstay my time with founders and the management team.
I don’t want them dealing with a whole bunch of angel investors, as opposed to actually being out there running and building their business.In other words, I’m not trying to be right in my questions.
Instead, I’m always trying to add value.
The observations I share, compiled over a longer period of time, are more valuable than any type of harsh questioning or unnecessary advice I could give.
Understand where you can add value. Don’t over-add. And definitely don’t be intrusive.
If you’re asking the right questions and just trying to be helpful, you’ll stand a much better chance at increasing the valuation of your investment.
That’s all from me for now, but I’ll be back shortly with even more insider tips. Stay tuned!
Talk soon,
Cameron Chell
P.S. By becoming an angel investor, you could be one of the first to invest in the next Elon Musk, Steve Jobs, or Bill Gates company… all with infinitely greater upside potential. Today, America’s favorite VC is walking you through his formula for finding these potential unicorn startups and proving that anyone can transform their lives with as little as $100 within the next year. Catch the event transcript here.
Follow @angelsandentrepreneurs
I like this opportunity
Well stated. I have seen such negative posts in some blog replies, and even on social media outlets. It appears some believe being critical is helpful.