The final topic covered in Winning Angels by Amis and Stevenson focuses on an important concept called harvesting that should be considered by entrepreneurs when starting a business. Harvesting eludes to the various exit opportunities that a business can take whenever the time comes. Of course, an entrepreneur does not need to know exactly how he and investors will exit an industry, but it is something that can be a selling point to potential investors if you have some ideas in place. At the end of the day, investors are ultimately looking to invest their money in opportunities that will yield returns. If an entrepreneur can show investors how his/her idea will provide them with returns on their investment, then he/she shouldn’t have too much trouble raising funds.


Amis and Stevenson highlight seven various exit paths that a business may go through. These paths include a walking harvest, a partial sale, an initial public offering (IPO), a financial sale, a strategic sale, and then two not so ideal options known as Chapter 11 and Chapter 7 which would serve as a last resort in worst case scenarios. Of these options, the strategic sale seems to be the most common and sought-after path. The authors describe a strategic sale as one that involves a buyer who “is typically an industry player that will pay value beyond what the cash flows might suggest.”


I found this final chapter to be extremely interesting because quite honestly, I have not put a lot of thought into exit plans when thinking about business ideas. I typically think about things like the quality of the product/service, who will be the target market, how would you market to this demographic, etc. This book and especially this chapter have opened my eyes to the importance of at least thinking about potential exit strategies even though a business may only be in an idea phase. Investors want to make money on their investments as do most entrepreneurs. Therefore, taking the time to think about the end goal can be extremely beneficial in the development of a business. It almost allows you to somewhat reverse engineer your thinking which may help provide guidance when developing a business plan and strategy.

There are many ways in which an angel investor can support an entrepreneur and his/her business. In their book Winning Angels, Amis and Stevenson break down these various roles as silent investors, reserve force, team member, coach, and controlling investor. These roles are listed in order of least involvement to most involvement. Investors normally decide their level of involvement based on things such as how much have they invested, what kind of support does the entrepreneur need, how much time do they have to give, etc. Their level of involvement may also change as a company develops. Many times, entrepreneurs need more hands-on support during the early stages, and once the business is more developed, then the investors can scale back their involvement and be available when needed.


Based on the quotes provided in this book by experienced angel investors, it seems that most of them prefer to have some level of involvement as opposed to the silent investor route. The silent investor seems to be more for a minority investor who is just looking to trust an entrepreneur in hopes of getting some return on their investment. These investors usually have a lot of other things going on to where they simply don’t have the time or desire to have much involvement. I personally would like my investors to have some level of involvement as an entrepreneur, and if I were an investor, I would also like to have some level of involvement in the company I am investing in. One angel, Steve McGeady, says “I always like to add some value other than simply money. I try to get involved in things where I can help out personally.” I love this quote because it shows that the investor cares about the business and wants to help the entrepreneur in any way he can. It also shows the importance of investing in businesses that you can actually add value to outside of writing a check. Money is helpful, but experience and expertise are just as valuable. Especially if it can help you avoid costly mistakes and potentially save you money.


At the end of the day, developing and running a successful business is a team effort. The more people involved who have experience in the industry at hand and a passion for the product being produced, the higher chance of success. I’ve learned that surrounding yourself with well-connected and like-minded people is a must. A mutual respect among business partners and team members is essential as well.

To negotiate or not to negotiate? The question every investor will face at some point during the process of getting a deal done. There are many aspects to be considered when deciding if and how to negotiate. However, one of the most important things to consider is how will the negotiations affect the relationship between the investor and the entrepreneur. Starting off on the wrong foot could be detrimental to a business opportunity.


Negotiating can be a very emotional process, and therefore, many investors prefer not to risk souring a relationship with an entrepreneur over negotiations. So how do these investors ever strike any deals if they aren’t negotiating? The authors of Winning Angels lay out a few options. One, they let someone else do the negotiations for them. Outsourcing this responsibility to an attorney allows the investor to shift any ill will to the attorney as opposed to coming off as greedy. Another option is they leave it up to the entrepreneur. If the entrepreneur proposes a fair deal, then they accept. If the investor doesn’t like the proposed deal, they simply decline the opportunity and move on. A third option is the investor doesn’t care much about the financial aspect at this early stage time. They will accept any reasonable terms presented by the entrepreneur because they want the entrepreneur to feel good and remain motivated to win. Sometimes the investor may also wait until later and more significant investment rounds to negotiate terms. Although it seems crazy to invest money and not negotiate terms, all of these reasons help to justify those decisions.


On the other hand, some investors view negotiating as very important because it is an opportunity to further evaluate the personality, characteristics and values of those you may be going into business with. You are not going to want to go into business with an entrepreneur who is more focused on being greedy and striking the best deal for themselves. And same goes for the entrepreneur when deciding whether an investor is the right partner or not. Negotiations can bring out the true colors of individuals so it can certainly be used as a vetting tool. You also don’t want to go into business with someone who can’t handle a little pressure and find a way to problem solve without getting their feelings hurt.


At the end of the day, there are multiple ways to go about the negotiation phase of sealing a deal. If all parties go into the process with a fair and realistic bargaining range, then it seems likely that a fair deal can eventually be made. And sometimes the best deals are the ones that aren’t done. Not every potential opportunity has to be carried out. Knowing if and when to walk away from the negotiating table is an essential skill to have.

This week’s reading of Winning Angels by Amis and Stevenson focused on the topic of structuring, specifically as it pertains to investment deal structure. This is certainly not a topic in which I have a lot of experience or knowledge; however, I did find it interesting as it is obviously a very important aspect of either investing in a company or finding investors as an entrepreneur. The three structures discussed in this book include common stock, preferred convertible with various terms and convertible note with various terms.


The common stock structure seems to be the least structured of the three. It generally involves a little more trust in the entrepreneur and partners. The other two have more terms and offer more protection to the investor, but they can also sometimes be complicated and sour relationships between investor and entrepreneur. In a perfect world, it would be nice and simple to be able to trust everyone you are going into business with so that everyone benefits in a fair and equitable way. Unfortunately, not everyone can be trusted and when it comes to investing large amounts of money, it seems reasonable to want to have some terms set in place to protect the investment.


While I have never been in a position to be an angel investor to an upcoming company, I have had a recent experience of exploring the opportunity to invest/buy-in to the ownership of a business. As someone who has never been in that position before, I made sure to reach out to people who could provide me some insight and guidance into things to be looking for while doing my research and deciding if it is a worthwhile investment. I talked to other SMEs in the industry, lawyers, and CPAs. I am extremely grateful that I did because they all helped me to come to the realization that given all of the circumstances, what was being asked for would most likely not be a good investment for me at this time. The point I want to get across from my very small experience is that having a strong network can be vitally beneficial when it comes to dealing with aspects of business that you may not have much experience with. I not only utilized preexisting connections, but I also branched out and made new ones through this process. While things did not work out how I originally hoped or envisioned, I certainly learned a lot.

From an outsider’s perspective, I have always found the process of valuing to be fascinating. I have always enjoyed watching shows like Shark Tank where you have investors running through various calculations to create an offer, and you have entrepreneurs showcasing and defending the value of their company in hopes of finding a partnership at a fair price.


I recently went through a valuation process myself as I have been trying to determine whether or not to buy in to a local gym and become part owner. While I won’t share the details of this deal for confidentiality reasons, I still wanted to share my experience compared to some of the strategies brought up in the book Winning Angels by Davis Amis and Howard Stevenson. Luckily, I have made some connections and have had some qualified and experienced people advising me along this process. They helped me to understand what questions I needed to be asking and what information I needed to be looking at. Most of which consisted looking at various financial statements as well as determining exactly how the current owners viewed the future direction of the business. Ultimately, after going through some negotiations, I made the gut decision not to invest in ownership of this business at this time. Given the industry, it seems to make more sense for me to save that capital and invest in my own business and make it exactly what I want.


The chapter on valuing in Winning Angels provides various methods for calculating valuations and determining whether the numbers support a good deal or a bad one. Most of the methods seem to support early stage valuations in the $2-10 million range for a typical angel investment opportunity. While numbers are obviously very important in deciding to invest or not, the authors of the book also point out that the numbers aren’t always the deciding factor. I really liked their splurge on “the feel good factor.” Just because numbers seem to make sense, doesn’t mean that an investor feels great about the entrepreneur or the industry in which the business exists. On the flip side, some investors will make what some would consider bad/higher risk deals just because they believe in the entrepreneur and they want to be in good standing with the entrepreneur for future opportunities as well. What I really like about this topic though is that it tells you to trust your gut. Human instincts are an incredible thing, and I feel as though I have trusted my gut through my recent experience leading me to make the right decision.

This week’s blog post focuses on the importance of evaluating business opportunities as it relates to angel investing. When it comes to investing large sums of money in an early-stage company, doing your homework as a potential investor is very important. In the book Winning Angels, the authors discuss an evaluation framework developed by William Sahlman and Howard Stevenson at Harvard Business School. The elements of this framework consist of the people, the business opportunity, the context, and the deal. These are the key elements that should be taken into consideration when evaluating an investment opportunity.


For this post, I want to focus on the people aspect because it really put an emphasis on the entrepreneur. At this stage in my life, I am focused on entrepreneurship and this topic really helped me understand what potential angels may be looking at should I get to the point of needing investors for a business idea. From reading this book and talking to other successful business minds, I have gathered that the entrepreneur and his team are ultimately the most valuable aspect of securing the investment of an angel. General Georges Doriot, the founder of modern-day venture capital, is quoted saying “I will invest with an A-quality man with a B-quality project, but not the other way around.” I love this quote because it makes so much sense. The entrepreneur/inventor is the engine behind any early-stage business. A product is no good if it doesn’t have a powerhouse willing to put in the long hours required to help get the product to market.


So what characteristics do angels look for in an entrepreneur? First and foremost, a good entrepreneur exemplifies perseverance. They will find a way to win and be successful. Other important characteristics include honest, courageous, competitive, resilient, charismatic, and intelligent. Some of these seem pretty obvious and can certainly be faked during a one-off meeting. Therefore, experienced investors will take them time vetting an entrepreneur to make sure they are who they appear to be. They will ask the entrepreneur countless questions. They will reach out to references provided by the entrepreneur to find out more. They will ask around to other people in the related industry to see if they can find any information on the entrepreneur. By the end of it all, there is no hiding what type of person you are and what type of entrepreneur you will be.


In conclusion, the entrepreneur is one of the most important aspects for angel investors to evaluate when considering a potential investment. The extent to which angels are willing to investigate when they are putting large amounts of money on the table is rather considerable. Therefore, as an aspiring entrepreneur, I am further realizing the importance of networking and building the best reputation I can for myself. Researching this topic has only increased my desire to continue to challenge myself to become more knowledgeable. I plan to do so by continuing to be an active part of my master’s program and to pick the brains of other successful business minds as I increase my network.