What Every Angel Investor Wants You to Know (Part 3)

Startups are a Social Good

by Brian S. Cohen

[This is the third in a four-part series of excerpts from Brian S. Cohen and John Kador’s book, What Every Angel Investor Wants You to Know, which is available on Amazon and at independent bookstores.]

I approach angel investing with a basic premise: startups are good for society and they need angel investors to help them get started and build a strong foundation. That’s why I wanted to write a guide to bring entrepreneurs and angels investors together for their mutual benefit and the benefit of all startup communities.

I can’t claim to be representative of any investor but myself. Every angel brings his or her own priorities, desires, and attitudes to the practice. I think there’s room for almost every kind of mix, but I do ask that investors have the confidence to be upfront about why they are investing in a specific company and what values they represent.

I’ve asked hundreds of angels why they invest. Many invest for the financial return. Some do it for fun or to keep themselves engaged in the future of their previous businesses. Most angels invest because they sincerely want to help entrepreneurs, although they are not necessarily good at it.

I’ve started a number of companies over the years. Some have been more successful than others, but all have shaped me as an entrepreneur and I’ve learned valuable lessons from each. One of the most valuable benefits of starting companies is that I surrounded myself with lots of smart and highly creative people. I hired perhaps a thousand of them over the years and developed a real kinship and life camaraderie with many.

The Entrepreneur Identity

The entrepreneur identity became more central to my professional career and personal life and even informed the way I parented my own children. Maybe I took it too far. I’ll let you be the judge. As my children were growing up, I talked to them as if they were little entrepreneurs. As they got older, I actually said these words:  “I expect each of you, before the age of 26, to start your own business.” My children didn’t have an immediate reaction. Maybe they never heard me. But their ears sure perked up after my next statement.

“I’m not going to leave you any money, but I will invest in you.”

I’ve told that story many times over the years, and I’ve noticed something funny. When other parents hear that statement—I don’t believe in leaving money to you but I do believe in investing in you—most of them stop short, their gaze settles at a point beyond the horizon, and they knowingly shake their heads as if I articulated something important and true.

Other parents were not convinced. “Why are you putting the children under this pressure?” asked a friend with two preschoolers. “How do you know they want or even can be entrepreneurs?” What I said is that the skills they would learn on the road to being an entrepreneur would make them more valuable to any employer.

In fact, sometimes I felt a little guilt-ridden because I might have been putting my children under too much pressure. The truth is, 26 was an arbitrary age that seemed impossibly remote when I first started talking to them about being an entrepreneur.

Much later, I began to formulate the answer to the question that earlier eluded me. Why was I so set on my children having an entrepreneurial identity? And here’s the short answer.

Entrepreneurial Skills are Always Desirable

Even if you never run the company you start, even if you fail, I believe that everyone regards entrepreneurial leadership skills and experience as intrinsically desirable. People with entrepreneurial experience are simply more hirable.

So whether my children want to work for Google or General Electric, I say that they will be in a far better position for having had an entrepreneurial experience. Employers value those people who have demonstrated a certain approach to leadership and getting things accomplished.

For years, I took a lot of grief from friends and family over my challenge to my children. But then something funny happened. The rest of the world caught up with me.

Today, it seems, almost everyone wants to be an entrepreneur. High school and universities are hotbeds for start-ups. Summer camps for gifted children foster a rising spirit of entrepreneurialism. In disciplines such as computer science and engineering, a majority of the best students are now working to start their own companies rather than pursue traditional career paths at established organizations. Incubators and accelerators are popping up all over the world to nourish and cultivate the hunger of people to start their own companies.

It turns out that all the young adults really wanted to start their own companies. A few had practical ideas about the businesses they wanted to launch. Others were more tentative in their visions, but that didn’t keep them from being highly enthusiastic about the outcome: a startup they would launch to success. Some of them didn’t seem to care what businesses they launched; they just wanted to launch a business . . . almost any business. On one level it was nutty, but on anther it made perfect sense. As they talked about their dreams, it because obvious to me that they were talking less about launching businesses and more about launching a sense of future control of their lives.

Brian S. Cohen is chairman of the New York Angels and the author of What Every Angel Investor Wants You to Know: An Insider Reveals How To Get Smart Funding For Your Billion-Dollar Idea (with John Kador, McGraw-Hill), from which this post is adapted. Cohen is the first investor in Pinterest. Over the past decade, he estimates he has considered more than 1,000 pitches for startups. More information about the book at www.getfundedbyangels.com

This segment is part 3 in the series : What Every Angel Investor Wants You to Know
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