Confessions of an Angel Investor: Their Dream vs. My Money

“Who’s running this company? Me or you?” Mike said. He was the entrepreneur. I was the angel. Those words began my understanding that he had lost all respect for me and changed how I approached being an angel investor.

“What are you saying?” I asked.

“I want out. I don’t want to do this anymore. I want to go back to corporate,” Mike answered.

I would have lost a million dollars if he had left right then. Startups are one strategy companies. And the strategy is first and foremost centered on the entrepreneur. If the entrepreneur is in, there is always a chance. If not, then all bets are off. It is over.

I was a nightmare.

As a new angel investor, my fear of losing my money was greater than my goal of helping them achieve their dream. I was the entrepreneur’s worst nightmare. I was an executive just like they were, but I had control of their company because it was my money they were spending.

I aimed to help entrepreneurs achieve their dream of starting and building their own companies. This was my operating mantra. It sounded great, but I had some personal problems to address.

I had spent the previous ten years leading software and services companies. I was an operator, not an angel investor.

I was investing my money in entrepreneurs and wanted to ensure every penny was well spent. I was afraid of losing my money.

Eventually, I realized I was wrong.

I learned I was managing the tension between their dream and my money. And getting this balance right meant success or failure for both of us.

When I understood the problem, my problem, I was on the road to becoming a better angel investor. But let me be clear. This was difficult because I believed I knew best; my experience trumped their experience.

The entrepreneur and I were at odds in one of my early investments. I was trying to teach him the discipline of cash flow, and he wanted to grow his new company quickly. He saw an opportunity in Canada. This meant opening an office in Canada. Neither of us had any experience in establishing an entity in Canada. What were their corporate regulations and tax laws? Who knew? Opening this Pandora’s box seemed like a bad decision. It would be a massive distraction. We had the whole of the USA as a market. I told him, “Forget the Canadian market. Find other opportunities in Atlanta, Houston, or LA.”

But he was insistent. I had to make a decision. Is he running this company, or am I?

Leaders grow by making bad decisions.

I realized he insisted on this strategy because of my past behavior. I was all over this guy. I wasn’t an angel investor. I was acting like his boss, and he’d had enough of this. This was my test.

I stepped back, and he opened the office. The office was a waste of money, but he made his point, which changed our relationship.

This forced me to shift away from “my money” to helping him achieve his dream. I learned that my part was to help him grow as a leader.

The net of this was he learned the cash value in the bank. He now had less of it. This decision helped him to decide he’d rather be in corporate.

As an angel, managing the tension between dreams and money starts with our relationship with the entrepreneur.

Do we respect each other?

If we do, we can work through any issue or problem to reach the shared goal of success. If not, the result is a breakup. This was a difficult lesson for me to learn.

The reason is simple. I can only control one side of the relationship. I can choose to respect the entrepreneur. The entrepreneur needs to make this same decision. Respect must be reciprocal.

But this story has a happy ending.

Mike found a buyer for his business. I negotiated the deal. He made money, and he got his corporate job. I got my money back with a great return, which still shocks me. It was this entrepreneur, this startup, and this sale that launched my career as an angel investor. If it had failed, I would have been looking for a job to support my family.

Have you ever faced a similar tension between your investment and the entrepreneur's dream? How did you navigate it?