From Olivier Ezzratty’s Guide to High-Tech Start-ups, the 12 Commandments of a Business Angel are precautions to be taken by anyone who wants to invest in a start-up in this capacity. Valid for investors as well as startup owners, these few points can help both the parties during their transaction, especially if you are looking to buy a company. But what to look for when you want to be one?
1. Invest in projects you understand
We won’t say it enough, if you don’t know anything about IT, it might be wise not to invest in this area, otherwise you won’t always understand the issues inherent in this field. It is important to at least understand what the company does. There’s no point in investing if you don’t understand absolutely anything because you won’t be able to ask entrepreneurs the right questions, or give advice and even better ensure that the company really has future potential. Even if you’re not an expert in the field, be interested in the added value of what exists and what it offers compared to the barriers to entry.
2. Don’t Blindly Believe the Business Plan
Of course, it is a valuable tool and a good indicator of the quality of a strategy, but nothing more. Tell yourself it would be known if business plans were gospel. Furthermore, making a business plan is not forecasting the future but making a forecast which may vary according to several factors (economic condition, sudden development of the market, etc.). Ideally, you should take an interest in the variables taken into account and check that none of them are biased or worse, forgotten. Check both buying and selling. If some posts are missed, don’t hesitate to report it.
3. Control your enthusiasm and prefer to be confident rather than be swayed
Who has not yet been impressed by the presence, choice of words, gesture, eloquence of such a young entrepreneur? If in politics these are essential qualities, in entrepreneurship they are few, even if they can be harnessed. A good strategy is not necessarily a good strategy. To avoid falling into the trap, take a step back and get an outside opinion. If you are confident with key success factors, business model or competitive advantages, you will have a better chance of getting a viable project.
4. Prioritize the Team Over the Project
A startup is above all the people behind it. Without them, there is no business, no creation. It is therefore necessary that more emphasis is placed on project leaders than on project leaders. Two ideas will appear in two places in the world at the same time but will not experience the same success. Taking interest in the team is unimportant, especially if the company is facing difficulties because it will be the team that will hold the ship. In the same way, verifying that they have the necessary skills for company growth is no luxury.
5. Assess creators’ ability to question themselves
A startup is like life, it never goes according to plan. How do entrepreneurs react to the unexpected? Are they questioning themselves? So many parameters that will give you an overview of what you need to do. It is not unusual for a company to change its business model. So founders must have the ability to question themselves. While they shouldn’t listen to all advice (some of which is bad advice), they should still have an open attitude and be receptive to a variety of cues.
6. Don’t Take 6 Months Off to Negotiate the Shareholders’ Agreement
Hit the iron when it’s hot! There are topics that should be resolved as a priority and the shareholders’ agreement is one of them. There is no need to waste time and money as it is better to establish a clear base and thus avoid unfortunate misunderstandings. The shareholders’ agreement remains a basic legal document and as long as everyone is safe and cannot be harmed, you can move quickly.
7. Investing and Leadership Should Not Be Confused
I finance so I lead? certainly not ! Avoiding directing the companies in which you invest is a basic precaution that protects your investment from drowning itself. Keep in mind that entrepreneurs need money, advice, but not necessarily your leadership. On the other hand, the more you intervene in management, the more your security is likely to increase. As the limit is thin, be careful not to exceed it as you can quickly land in a situation of real management.
8. Given Word, Holy Word
If you are not planning to invest in any business, then you need not bother yourself for it. And if you decide to invest your money there, stick to your commitments. A business angel who doesn’t keep his commitments to startups is not a business angel but a business devil… you’re wasting time for this entrepreneur who can dedicate it elsewhere so you don’t have that kind of attitude. be able to get away
9. Minimize Your Risk by Diversifying
Leading to govern better, but above all to manage better. By diversifying your investments, you reduce the risk taken… Tale of the Egg and the Basket. In anticipation of a potential bad patch, it is recommended to diversify quickly because projects in which you will invest the risk will not succeed. If some will surprise you in a positive way, others will encounter unexpected difficulties so you can prepare for them as well.
10. Accept Bowls Like Any Entrepreneur
Investing is not always synonymous with a success story. And yet, it takes a long time to get there. The path is strewn with stones and in case of a fall, you have to accept the wrong move and learn from it. The minimum is to be aware that zero risk does not exist. In general, half of your investment will go into loss, a quarter will just stop and the second quarter will experience success.
11. Not investing your past savings
We know that playing the role of business angels is not accessible to everyone. If you have a tough end of the month, that you recalculate your race in cash or on your electricity bill, stay away! You must have the means to become a business angel. And for good reason…
12. Money Bet, Money Lost
Not all startups are destined to become international conglomerates with 10-figure turnover. Some, unfortunately, do not even go beyond the TPE stage. If you don’t want to be in constant pain and put pressure on entrepreneurs then be prepared to lose who invests your money in startups.
These are the 12 key points on which an investor who wants to become a business angel depends. With mirror effect, it is valid for the entrepreneur who has to choose his business messenger. but beware ! Business Angels Are Not (All) Angels: Bad Practices Exist and We Recommend You Read “Business Devils: Bad Behaviors That Can Be Confronted” by Guilhem Berthollet.