You can't have too many angels
waseem.substack.com
waseem.substack.com
A good way to deal with having a lot of angel investors is to create a separate 'angels' vehicle where angels participate, this vehicle then participates in your company.
That way you have all of the benefits and none of the drawbacks of having a lot of smaller early stage investors. You can roll your 'friends and family' round if you have one in there too.
Edit: Ah, the author mentions the 'roll-up' vehicle at the end of the article. Good.
However, in regards to angels, the shareholders agreement won’t work if they invested money through a convertible note. At least before converting, during which time they are creditors of the company and not shareholders, which actually gives them some additional leverage. Hence, I recommend using something like a SAFE if needed, instead of a convertible note.
Any examples of the language that you’re referring to. First time hearing about this so curious..
Sometimes it's a joke, but other times it is quite fitting.
And maybe that investor group makes many SPV, so each player is making 10, $10k plays rather one $100k play
Islamic banking goes in the other direction, though. In the US, anybody can loan money to anybody. Islam prohibits interest. "Loans" in Islamic banking are more like preferred stock, or a setup where the principal is loaned but anything beyond that is more like an equity stake.
Why is it unfathomable to imagine someone with a $500K NW writing a $5k-20k cheque?
To be accredited you either need $1M NW or sustained $200K income (2+ years). Leaves plenty of room for small-time angels who want to invest 1-4% of their net wroth
People putting out $50K cheques in 'very risky' things for strangers businesses very much likely to fit the criteria for accredited.
Maybe your 'Uncle' might do this, but it's generally not a concern that you're going to have that many of them that it's going to force you to go public. Also, you can vet for it by asking the question.
The most active funding platform for this is Wefunder.[2] This is sort of like Kickstarter, but with equity.
[1] https://www.sec.gov/info/smallbus/secg/rccomplianceguide-051...
There were some other rules changes this year that make it easier, though I can't find documentation of what they are atm. I've noticed more use of SPVs which simplifies things for the company.
The main problem with this is it's a bad idea for most investors because the investment opportunities are largely bad and take 6+ years to get any return.
My point about "zero bearing" stands. I'll repeat the concept differently: be careful if you have any non-accredited investors on your cap-table; there is a greater-than-zero chance it can affect the next deal(s).
1) Increasing the number of investors, increases a CEO’s effort required to maintain the same quality of investor relationships.
2) An investor doesn’t need to be malicious to be a major problem. Misunderstandings, misinformation, and disagreements are more likely with larger groups of investors. One disgruntled investor in a shareholder meeting can do great damage to perceptions, which can harm your chances of reinvestment from the other investors.
3) If you want to remain a private company, you must keep the number of investors below 2000.
In the current environment there is an unlimited number of investors with large pockets and a tiny population of capable founders. Use that to your advantage as much as you can.
If you are happy with slower growth, then of course you don't need to get outside investment.
See:
https://jacquesmattheij.com/three-roads-to-the-top-of-the-mo...
An oldie, but still quite applicable to the start-up scene today.
I'd go for "larger number of participants," for the reasons I mentioned.
The valuable insight is that, invariably, there are domain experts whose help can completely transform your business. As a result, it's worth investing time/resources to find and incentivize them to help you.
However, these experts may or may not be angel investors. If you narrow your search to only angel investors, you'll more often than not miss out.
Conflating the goal of locating expert counsel with the goal of raising money is more often than not going to waste of your time. Raising money is a long, distracting process, as-is. Just get it done as quickly as possible on fair terms with a trustworthy party.
You do understand that most angels invest in a company because their friend did. If you keep rejecting angels you aren’t going to get good terms because you’ll have nobody interested in your deal.
The process itself is slightly easier because I don't have to tediously type in wire instructions into my bank's website :)
The creator of the RUV can decide whether the company pays the fees or whether the investors pay the fees. The ones I've done so far have been "company pays the fee," in part I think to help avoid the perception that you're getting a worse deal via the RUV.
Overall, would _definitely_ use again as a founder. It's incredibly simple and it costs us ~$8K. To the angels, no cost no carry, so it's v similar to investing directly.
Also _should_ simplify our life with lawyers in a series A.
(I'd largely written the post before even being aware of that offering, which is why it's kinda tacked on at the end.)
I was at a startup that had over 100 angels... their cap table was messy and it definitely had an impact on raising.
As a participant in well over 20 investments now I've yet to see this go wrong even once.
If you haven't seen one of the above than I doubt you've been involved in more than a couple investments, let alone 20.