Frustrations of an Angel Investor #3 – Brilliant Inventors, Copycat Deniers, Lazybones and Serial Failures

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Angels meet them all. In my experience, too few of the first, and too many of the others.

Of course, it’s not necessary to be a brilliant inventor to have a wonderful business idea, and, with the help of Angel funding, go on to success. There is very little that is new under the sun, but there are always ways of developing, updating and improving existing concepts. So I’m always happy to meet enthusiastic would-be entrepreneurs with a sound business plan, who are prepared to dedicate themselves and work hard to build a business, and never mind if their concept is derivative.

But I do get frustrated by the many others who are out to exploit the financial opportunities that the Angel investment system offers. That’s not just some of the would-be entrepreneurs. The so-called ecosystem is not always what it seems, and much of it is parasitical, thriving off small percentages of the investments that are made into new businesses. But let’s leave that to one side for now, and consider those heading the start-ups who seek funding.

I tend to put the approaches I can’t stand into three categories.

Copycat Deniers are those who present a near-identical copy of another existing or start-up’s business as their own totally original ideas. Sometimes, sadly, they are simply deluded; they genuinely came up with the idea themselves, but never realised that others had got there first. The frustrating ones are those that (one can tell) really do know that they’re copycats, but insist their concept is entirely original.

The Lazybones are those that expect an easy life. Those serious about starting a new business and determined to succeed have always accepted that they’ll need to make personal sacrifices and work long hours, often for 7-day weeks. Angel investors are basically buying into the future efforts of the start-up entrepreneurs. Maybe times have changed. I always ask the ones I meet what they are planning at the weekend, and where they’re going on holiday. The answers can be revealing – especially the ones who are investing little or none of their own money in the business, yet seeking hundreds of thousands in funding and planning a Caribbean getaway….

Which leads me to my next cavil. This year I’ve met the leaders of 6 start-up companies who described themselves as “Serial Entrepreneurs”. Not one of them was over 30. All had got funding for several businesses over recent years. OK, so they’ve been good at convincing investors, but not one of their businesses had actually succeeded. To my mind, Serial Failure is not something to be proud of; but I suppose they were all happy to have had a good life through the funding that they had convinced other Angels to pour money into their previous start-ups.

Further, none of those had any actual knowledge or experience of the business that they were purporting to lead. Some of them are starting two or three businesses at the same time. I was most bemused by one business proposal that could most simply be described as a sophisticated cycle courier service; not only had the principal no experience of a courier or taxi business, he happily told me that he couldn’t even ride a bike!

To me, “seeing through” these things is common sense, so I’d expect other investors to reject these approaches too. However, there’s either a lot of “silly money” out there, or others just don’t do any research or meet the principals. Certainly a lot of investors rely on what they are told by the “Ecosystem” that associations such as the UKBAA are so proud of, and that promote and nurture start-ups.