This preface is about "When business angels abuse their position and network".
Right from the foundation of b-to-v in 2000, we wanted to avoid the term
"business angel" and build a network of “entrepreneurs investing privately
in start-ups”. The reasoning is simple: the title “business angel” is not
protected. Everybody can proclaim themselves a business angel. No proof or
training required. As a consequence, there is a staggering number of
unimpressive personalities in the market who refer to themselves as business
angels. Some of them are, however, not a heaven-sent blessing (“angel”) for
a start-up. Quite on the contrary, they are capable of detrimental
contributions, possibly landing the start-ups they support in hell...
This is why we are very selective at b-to-v with regards to the admission
of new members to our network. Nevertheless despite our best efforts, we
actively terminate memberships of individual members (two in the past 12
months), when we find that we do not share the same perspectives and opinions in
view of the role of a professional business angel. So what are our beliefs?
- We believe that a real business angel invests cash in start-ups.
He supports a promising start-up with at least a five-digit amount. His
investment stems from his own money, i.e. he has “skin in the game”. And he
invests on a regular basis. Nota bene: He who sits in 20 lunch meetings with
start-ups per year, sees all sorts of presentations, kills them all and
ultimately invests nothing at all or only once every two years, we consider
him a member of the wrong network or he is simply not a business angel by our
- We believe that a real business angel will lead his portfolio
companies with great care and prudence. He is a smart coach. He knows how to
motivate and strengthen his team. He has empathy and can read people’s
personality, and adjust his communication accordingly. He leads mostly by
asking questions, making suggestions, showing best practices,
and making introductions. When talking to others, he will always
(always!) stand behind his team and support them – even if things go South
and even if it is more comfortable to say “That’s what I had told them from
the very beginning…”.
- We believe that a real business angel will not require his
portfolio companies to compensate him for his support. His upside (and
compensation) comes from his stake in the company that he owns due to his
cash investment. He will not require any additional cash-kick-backs, not for
introductions to potential investors or business partners, not for Reviews
of the business plan. He may ask for a seat on the board of directors if his
expertise and experience and reputation may be of help. But at the same
time, he understands that this seat may be taken over in later rounds by
larger institutional Investors.
- We believe that a real business angel is self-reflective and
knows that he can be (and often will be) wrong. And by acknowledging his own
fallibility, he also acknowledges that his interaction with the start-up
team is not the interaction between a master and his apprentice, but rather
the interaction between two talented apprentices (or masters, for that
We know that his is a controversial subject. And some readers may in fact
argue that these rules are too idealistic. But there is a fine line that
connects start-ups with idealism.
Please feel free to share your opinion with us on the matter.
Alexander & Florian