Risks in Startups as an Asset Class: Part 15: Lack of Investor Control

In any equity investment, the retail investor ( read angel investors in startups), don't control any of the startups activities. In fact, it is like the coach who has given his knowledge and training to a set of players on a soccer field, but he has to stay outside the lines. What happens on the field is left to the players.

This position of passive contribution is an inherent risk in angel investing. The angel investor is only an enabler, but it is the founders who run the company. It is their decision to make and burden to bear.

This risk is magnified because there are many aspects of a business which the startup founders may not be aware of and an investor could spot them right away. The analogy is the relationship between a coach and a player. It takes both to win the game.

The risk of passive contribution is to be noted by the angel investor - this comes with the assessment of the founding team.

~Krystal Ventures Studio