Advice for Angels

Jeff Cornwall from the Belmont University Center for Entrepreneurship in Tennessee provides a good summary of a Fortune Small Business article providing advice to budding angel investors.  In short:

• Don't go it alone
• Follow your passion
• Locate the exit
• Befriend the vultures (the VC's)

To me, all rules are meant to be broken, but there is some merit to each of these.  A few small points I'd make.  First, the FSB article suggests not investing alone or part of a small group because you can become too "emotional" about deals.  In my view, a healthy dose of emotion is good for angels.  Often angels bring more to the table than their wallets and to look at things purely from a financial investment standpoint overlooks this.

In fact, the next advice, to follow one's passion seems to contradict the author's point a bit.  Nevertheless, the point is well taken that small groups face challenges that larger groups do not.  It's a factor to weigh.

The other point I take some issue with is that of exits.  I believe that exit strategies are overblown when discussing investments.  The entrepreneur and the investor should be of like mind regarding an exit (you don't want to invest in a company to find out the entrepreneur is looking for a "lifestyle company" and you're looking to cash out big).  But the focus needs to be on growing a good business, making the right contacts, and not being afraid to take the right exit.  Making it all about the exit leads to bad decisions.