Mar 022009

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Dr. Earl R. Smith II

Avoiding hard decisions – not insisting on tough performance metrics – choosing the hard for the easy – these are all recipes for hard times.


The reaction to my two prior articles in this series has reinforced my view that angel investors often, by their own tendencies, can make it less likely that their investments will prove profitable. In Angel’s Sins, I outlined some of the mistakes that early stage investors make. In Angel Investing – Governance I described how many investors overlook the contributions that a professional, independent board of directors can make. I have received quite a few responses from investors – some that contain tales of woe and loss while others invite me to ‘get involved’ in an effort to salvage what can be of a lost situation. I don’t much like these latter invitations – too hard on the digestion with little to show. Treating sick puppies may be necessary but this series is about preventive approaches.

The message that I deliver when I speak to groups of early-stage investors is that they have to look to their own tendencies. Physicians heal thyself! Their options are hard choices or hard times. If they don’t take a firm, focused and demanding approach to setting and enforcing the terms surrounding their investments, they turn the whole process into a rolling of the dice – and that is more like gambling than investing.

Most angel investors seem to approach the process with a kind of ‘grandfatherly’ attitude – or, perhaps, like a ‘rich uncle’ who is supporting the ‘younger generation’ with their favors and support. The damage this ‘gentle’ and disconnected approach can do is hard to overstate. Life understandings are ‘softened’ and rendered formless. Understandings that might support a career of success and accomplishment are turned away – and the result is failure where success should have been.

If you are getting the sense that this article is more about the negative impact on the recipients of angel investment, you are right. I have seen this benign neglect and ‘grandfatherly’ soft-soap ruin both businesses and careers.


Lies by Yevgeny YevtushenkoLying to the young is wrong.
Proving to them that lies are true is wrong.
Telling them that God’s in his heaven and all’s well with the world is wrong.They know what you mean. They are people too.
Tell them the difficulties can’t be counted, and let them see not only what will be but see with clarity these present times.

Say obstacles exist they must encounter, sorrow comes, hardship happens.
The hell with it. Who never knew the price of happiness will not be happy.

Forgive no error you recognize, it will repeat itself, a hundredfold and afterward our pupils will not forgive in us what we forgave.

Yevtushenko is saying something important – something angel investors should have tattooed on the inside of their eyelids. It’s not just that business is difficult to get right – not just that only one in ten start-ups make it to their fifth anniversary – not just that most CEOs may understand the business of their business – it is that these CEOs don’t understand the business of business – and the very people who could and should be teaching them the need for discipline, veracity and focus and exacting attention to detail – are smiling benevolently like some Cheshire Cat.

I am not one out to change the world, as we know it. I have long ago come to the realization that people are not going to change. My work with early-stage investors focuses on getting them to accept the need for effective, direct and often stiff adult supervision. In my book Amazing Pace: Turbo-Charged Business Development, I describe how this adult supervision can be arranged for the business development process.

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