Since Tailwind commenced operations in the fall of 2018, we have met with hundreds of entrepreneurs, start-ups, and early-stage companies. These companies come from all sectors, have diverse backgrounds, and face unique challenges. There is, however, one common thread linking these companies together – a near universal need for growth capital.
Entrepreneurs, as well as various incubators and accelerators in the ecosystem, overwhelmingly share the need for equity investment to help these entrepreneurs and early-stage companies finance operations, growth plans, and ultimately and realize their dreams or potential.
There is a constant “ask” for money and many questions that can be summed up as “why are there not more angel investors supporting these companies?”
Tailwind believes the answer is simple: lack of respect.
There are groups that train “investors” to be “angel investors”. What about training entrepreneurs to respect the investor? The point is not for entrepreneurs to be cordial, deferential, or even respectful of an investor’s time in the initial meeting – we hope this goes without saying and being respectful of your time, we promise we have a more meaningful takeaway. Of the hundreds of companies that we have met, rarely do entrepreneurs realize that the angel investors will eventually want their money back, plus a reasonable return for the risk they are taking on. Money returned is not paper gains, but cash in the bank. What will the entrepreneur do to protect and manage the investment dollars judiciously, and ensure a pathway has been laid for an investor to realize their returns?
A unicorn might one day not be a company with a billion-dollar valuation, but the entrepreneur that respects their angels. As soon as a company attracts external capital, such as an angel investor, there is a heightened level of respect and responsibility that is required.
Another important factor to consider is that an angel investor is taking on a disproportionate amount of risk, and therefore deserves greater reward on those investment dollars. It is the very simple risk-reward trade-off. Angel investors are not charitable donors or piggy banks. These individuals have choices on how they spend their discretionary dollars, and it does not need to be investing in high-risk, early-stage companies that might only provide grief and a loss [Ed. note: if you are a start-up, even if you/ your business / your tech / your company is “really awesome”, you represent a high-risk investment].
What do you think? Should industry drop the name “angel” so that the needs of the investor are not diminished? We are on board with killing this term. Maybe the term “angel” should only be used for those individuals that invest in early-stage companies for completely altruistic reasons, are not expecting a return, and are completely unconcerned with the thought of losing 100% of their “investment”. In our experience, you may be waiting a long time to find an angel that meets these new criteria.
At Tailwind, we have curated our FlightPlan™ program for entrepreneurs and early-stage companies so that they are well positioned to demonstrate their value proposition and how they will manage investment dollars.