An Introduction to Angel Investing - A guide to investing in by Tom McKaskill

By Tom McKaskill

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However, corporations not familiar with investing in early stage ventures can be a mixed blessing. Because they are not familiar with the norms of such investments, the firm may find itself wasting considerable time trying to convince the corporation of the value of an external investment, although benefits may come from a more favorable valuation, access to corporate resources and an early exit opportunity. The Angel should be wary of the motivation of the corporate investor. Their involvement is mostly driven by their own strategic objectives and their support may be highly influenced by wanting the investee firm to develop in a particular direction.

At the same time, firms receiving investments (investees) are looking to their General Partners for advice, contacts and help securing customers, grants and staff. When investee firms get into trouble, such as not achieving targets, making losses or losing key staff, General Partners need to devote considerable time to their current investments and have little time to source and evaluate new investments. General Partners will also be actively involved in setting strategy, planning and executing the exit.

If a founding investor is working in the business, they may well feel an equal partner and want to be actively involved in the decision-making on a day-to-day basis. While this can work in very small firms, it becomes very problematic as the firm grows. As more staff join and the firm becomes more complex, some formal organisational structure is required. At this point, the question of who is boss and who makes the decisions becomes a real issue of debate and often conflict. With independent people, this can be more easily resolved; however, when the other person is a spouse, cousin or best friend, the issue is not so readily resolved.

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An Introduction to Angel Investing - A guide to investing in by Tom McKaskill
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