What is Entrepreneur-Friendly?
I’m not sure when I first heard the term. Probably in my early startup days, when all I knew about any other companies than my own was from TechCrunch. In 2009 the industry started filling up with successful entrepreneurs, who joined cool new funds with hip names, promising to pick and manage investments based on empathy with founder hardship. This was called the”entrepreneur-friendly” investor mindset.
Originally of course, investors were made of completely different material. Bankers, M&A consultants, wealth managers. In the very beginning, in in the 60s and 70s, these were adventurous types, who would lobby financial institutions for money to fund non-traditional, high-risk-high-return businesses. But as the industry matured, VC became just another asset class, managed by finance professionals.
Then another change happened in the last decade, as a number of highly successful founders turned to investing, coining the term “entrepreneur-friendly”. Marc Andreessen, Tony Hsieh, Mark Suster, and others paved the way for an entire cohort of entrepreneurs with some level of past success to turn over to investing.
This has resulted in a remarkable marketing shift for investment organizations: in order to attract the best founders, investors are increasingly advertising themselves as “entrepreneur-friendly”. Especially in the early-stage market, and especially outside the US, this sometimes takes a whole life of its own. As most markets outside the US, save for a few exceptions like India and China, are not yet big enough to support commercially viable venture ecosystems, entrepreneur-friendliness sometimes simply boils down to wearing sneakers, e-mailing memes, and other instances of popular-culture founder behavior replicated by investors. Who very often have never been in an entrepreneurial position at any point in their lives.
In my various roles over the past years, including seed fund management, angel investing (syndication), mentoring, organizing events, teaching at seminars, etc. I have always tried to empathize with founders, placing their needs above other tasks. And that’s hard, because in the end of the day, whatever it is that we do to support companies, we need to be making a conscious choice about the impact of our work: learning or earning.
Are we helping founders to become (better) entrepreneurs? That’s largely an educational trajectory, and the gains from this work are usually not in the value of the companies they run, but rather in the personal growth of these individuals. Or do we focus on company value? In that case, in most situations outside developed ecosystems, the best thing would be to ask the founders to give up management to a professional CEO or exec team. And that’s not the most entrepreneur-friendly thing to do, to say the least.
As I go around cities in Europe and the regions adjacent to it, meting companies and building relationships with local angel investors, I often find myself wondering about entrepreneur-friendliness. Sometimes you see investors refusing a meeting with an entrepreneur in favor of a sailing trip with local government officials. Or VIP areas and badges at events that allow investors to find refuge from the “common founder folk”. How do you behave in such cases if you want to be entrepreneur-friendly?
Facing this question too many times, I have set up a few simple rules for myself:
- I allocate 10% of my work time for meeting entrepreneurs that do not fit the investment criteria of Cross Border Angels, with a particular focus on Southeastern Europe as my primary home region. I help in organizing educational programs, do mentorship meetings, and try to put myself available for validated introduction requests.
- I try to minimize my engagement with entrepreneurship communities and events that are driven by corporate or government interests first. One of the bad things happening to our industry is that corporations and governments have discovered the value of associating with startups, often without being really useful to them. There are endless conferences, startup competitions and grant schemes that market themselves as helping entrepreneurs, but in reality just suck founders’ valuable time while only giving PR value to the sponsors.
- I’m learning to say no. That’s generally a hard thing in this business, as you don’t want to be the guy who passed on a great opportunity when the valuation was low. But that’s a risk I’m willing to take, knowing that you can only be good in the stuff you really focus on. And we focus on early-stage, post-revenue companies that are ready to enter a new market, and whose product resonates with the competences of CBA angel investor members. And when I see something outside of that field, I just have to say no.
- When it comes to companies I’ve invested in, syndicated for, or advising, I’m always making sure that founders are treated fairly and their personal interests, which can vary wildly depending on the situation, are taken into account. Some founders are grateful for the opportunity to step back and have a professional CEO step in. Others are ready to learn quickly and do the job themselves. There is no one-size-fits-all here, but there is always a way to treat founders with dignity and respect, even if investors at times want something opposite.
Being entrepreneur-friendly while minding the business isn’t always easy. You want to be there for founders when they need help, but you also have to make sure the strategy for returns is working out. How do you cope?
At Cross Border Angels, we are committed to helping the best entrepreneurs around the world connect with the most useful angel investors. We also work with our companies in building top-notch market analysis, financial models, and business plans, which we call the Investment Pack. Learn more about CBA and our services at http://crossborderangels.com/entrepreneurs.