The lows of an Angel Investor

ImagesWe have been watching the highs and lows of investing in our house for over 25 years.  There are the hits out of the ballpark where everybody gets excited and then there are the major losses which are just killers.  Those losses are so upsetting, draining but also incredible learning experiences for everyone involved.  I wrote this post in March of 2012.  I never posted it but went back to look at some of the drafts I never posted and decided to post it today.  The good news is nothing around investing has truly changed.  The investments are different, the valuations have shifted and I am definitely rehoning my thesis but the basics around investing doesn’t change.

Losses are never pretty.  The questions keep running through my head.  Why?  How did we get to this place?  What could have I done differently?  Can I fix it?  Do I put good money in after bad?  Do I walk away?  On and on and on.

Here are a few things that I have learned.  Trust your gut, cut your losses, and realize that there will always be wins and losses.  From the entrepreneur’s side, a few lessons learned too.  Don’t take all the responsibility on your own shoulders.  Tell your investors the reality of what is happening, not from a management perspective but also in regards to cash flow.  Keeping everything under the hood will only work in the short term, eventually, everything comes spilling out.  If there is a problem, nip it in the bud quickly and tell your investors what is happening.  Maybe those investors can help the entrepreneur resolve the issues. If not, you get so far down a path sometimes that you end up at a point of no return.

Bottom line is honesty, and transparency is the best policy.  I like investing in companies where there are a group of investors from the start with different skill sets.  It makes a great foundation to help the entrepreneur grow their business from the get-go.  Doesn’t mean it will always work but having different sets of smarts at the table pushes everyone to think differently.

I believe in every company that I put a dime into that there is going to be growth and an upside for everyone involved, some bigger and some smaller.  Getting into a place where all losses have to be taken and there is zero gains is painful but those are the lows of the Angel investor..and the entrepreneur and hopefully, I will have very few.