Question: Has anyone on here ever used an angel investor and what did you think about it?

[flampton]

Hi all,

Was hoping to get insight into the angel investor world. And no your experience does not have to be aquarium based. Just looking to see about pitfalls and mistakes you made. How did you find your angel. Etc... And also please don't suggest I look to Shark Tank, haha!!!

Thanks!
Eric

 

[Fish E]

Bootstrap if you can unless of course you are dealing with large capital investments or need specialized advice/direction. Once you bring in investors, they have a say. You now have a "boss."

 

[flampton]

Bootstrap if you can unless of course you are dealing with large capital investments or need specialized advice/direction. Once you bring in investors, they have a say. You now have a "boss."

Yes that is one of the risks I'm considering. And one of the things that will break me from an investor who wants control. I will certainly not accept that they have majority share. However continuing R and D is looking close to 200,000. And then bringing product is going to be closer to a million.

I thought kickstarter too but the product(s) and trade secrets involved will not be protected and the idea will get swallowed up quickly by competitors. Unless I can just say believe me, and they give me money, haha!

I guess another option is to seek a partnership with an established company, but that is super risky as well. Even with a NDA during talks, I don't have the economic power to beat them in court for violations.

 

[flampton]

Reupping for some new eyes

 

[Mikedawg]

I dabble with some partners; essentially, we look for true self-managed business opportunities with owners/principals who know what they are doing, but are limited in their ability to raise cash or don't want to let go of a family run enterprise - that said many AIs are only interested in "mail box" money, and don't want to be bosses. So, you would need to make your business plan as attractive as possible, etc., and be prepared for some very tough questions from non-forgiving strangers.

Also remember you probably can't have it both ways: many investors would want good surety/some level of control to turn over that kind of money for an idea which is not yet a performing business.

Several universities and government agencies offer pretty good advice on developing/financing a business and that might be a good starting point - you might find the business vetting process they put you through helpful in discovering all the issues/considerations you'll need to address, strategies for finding manufacturers, etc.

Good luck.

 

[flampton]

I dabble with some partners; essentially, we look for true self-managed business opportunities with owners/principals who know what they are doing, but are limited in their ability to raise cash or don't want to let go of a family run enterprise - that said many AIs are only interested in "mail box" money, and don't want to be bosses. So, you would need to make your business plan as attractive as possible, etc., and be prepared for some very tough questions from non-forgiving strangers.

Also remember you probably can't have it both ways: many investors would want good surety/some level of control to turn over that kind of money for an idea which is not yet a performing business.

Several universities and government agencies offer pretty good advice on developing/financing a business and that might be a good starting point - you might find the business vetting process they put you through helpful in discovering all the issues/considerations you'll need to address, strategies for finding manufacturers, etc.

Good luck.

Yes I just moved from Gainesville, FL and they had a great incubator program. NAU where I'm now at has one as well but unfortunately they only support their researchers developed IP. While I do perform research here it is not on the IP the company would be based upon. I will peruse federal and local organizations to see if I can identify more options.

Yes and understand I can't have it both ways, but would like the company to have some semblance of the original idea. I've heard that things don't always go that way though and that's why I'm trying to be careful how I go about this.

Thank you for all your advice Mike, I really appreciate it!
Eric

 

[Pistondog]

Yes I just moved from Gainesville, FL and they had a great incubator program. NAU where I'm now at has one as well but unfortunately they only support their researchers developed IP. While I do perform research here it is not on the IP the company would be based upon. I will peruse federal and local organizations to see if I can identify more options.

Yes and understand I can't have it both ways, but would like the company to have some semblance of the original idea. I've heard that things don't always go that way though and that's why I'm trying to be careful how I go about this.

Thank you for all your advice Mike, I really appreciate it!
Eric

Stating the obvious, dont forget to patent the ip, domestic and international, which can cost tens of thousands. But if you have patented IP, the investors will seek you out. This is, imo, the 1st step.

 

[flampton]

Stating the obvious, dont forget to patent the ip, domestic and international, which can cost tens of thousands. But if you have patented IP, the investors will seek you out. This is, imo, the 1st step.

I have three pieces of technology in process that will need to be patented. The use of these three technologies will be used with a program that I might make a trade secret. I, as a scientist, despise trade secrets. I unfortunately also know the ruthlessness of business. It's a tough choice for me. My problem is I need some kind of funding to make the three patents possible. There is no way I can self support that much research (money and time) while maintaining my job. It will be hard enough as the only employee at first (excepting some minimum wage help.)

So again it might be where I see if any companies want to pursue this, but somehow I need to maintain some control of my IP. Which is extremely unlikely...

I feel though that the only thing that I have going for me currently is the fact that a lot of well off investors have reef tanks. So if you're a well off investor who loves reefs well let me know.

 

[Pistondog]

I have three pieces of technology in process that will need to be patented. The use of these three technologies will be used with a program that I might make a trade secret. I, as a scientist, despise trade secrets. I unfortunately also know the ruthlessness of business. It's a tough choice for me. My problem is I need some kind of funding to make the three patents possible. There is no way I can self support that much research (money and time) while maintaining my job. It will be hard enough as the only employee at first (excepting some minimum wage help.)

So again it might be where I see if any companies want to pursue this, but somehow I need to maintain some control of my IP. Which is extremely unlikely...

I feel though that the only thing that I have going for me currently is the fact that a lot of well off investors have reef tanks. So if you're a well off investor who loves reefs well let me know.

Pick the best of the 3 and develop that to minimize capital risk.
After the provisionals are filed, you'll need to develop a business plan to determine viability. None of that takes alot of money, if the idea is developed/proven.

 

[ichthyogeek]

Well now you have me curious (as a fellow scientist. If I was an angel investor, well...I'd probably be interested too)... let me know if you have any job opportunities coming up! I'm ready to work, have lab experience/a fancy [undergraduate] degree, and am very willing to relocate!

The way I see it about patents, is that they'll wear off over time. Wasn't their original use just supposed to support recouping the cost of R&D? So wouldn't you be able to publish the information after the patent wore off? I've sent you a PM because I don't want to infringe on any IP squabbles....

I have a guess about what it is...I wonder if I'm right....

 

[Discordian]

There is no way I can self support that much research (money and time) while maintaining my job. It will be hard enough as the only employee at first (excepting some minimum wage help.)

Just my two cents and maybe a bit harsh, but if your idea means you need 200k so you can quit your job and research it, before you can even get a patent, it probably isn't investable yet. If you really believe in your idea, start sacrificing, work nights and weekends, take on debt. Push your idea to a point where you can atleast protect your IP. Most people aren't going to want to gamble on any idea like that unless they are extremely well compensated for the risk... meaning you would probably be better off funding it with credit cards.

 

[ichthyogeek]

Just my two cents and maybe a bit harsh, but if your idea means you need 200k so you can quit your job and research it, before you can even get a patent, it probably isn't investable yet. If you really believe in your idea, start sacrificing, work nights and weekends, take on debt. Push your idea to a point where you can atleast protect your IP. Most people aren't going to want to gamble on any idea like that unless they are extremely well compensated for the risk... meaning you would probably be better off funding it with credit cards.

So uhh....just a touch of pushback on this. Yes you need to work hard to achieve your dreams if they’re something like a startup would do. But there is a really really toxic culture in startups (specifically tech startups) where workers and the founders specifically are supposed to work themselves to the bone, have no lives, and basically breathe the work. It’s incredibly unsustainable, and burnout frigging sucks, especially if the startup never manages to take off.

And not all startups succeed, so putting on debt is just another part of the calculated risk that is relative. Do all startups start with a net loss? Yes. But the question is if it’s worth it, and if there’s a cushion to catch you if you fall.

 

[aggrofish]

First off. I have no dealings with standard angel investors and wouldn’t deal with them even if they tried throwing money at me. To me they’re too poor to be a real VC and they want far too much in return. They’re not going to deal with you anyway because what you have isn’t a business, it’s an idea. An idea that others are thinking about right now.

If you somehow feel that you must pursue this, and need outsiders to finance your idea, your best bet would to slap together a LLC and sell membership units to friends and family. I don’t know what you’re doing, but at minimum you need proof of concept before approaching investors. Even then it’s going to take 3-5x more than you think and a lot longer so you’re going to need a steady supply of capital. That means a couple things. One - you’re going to run out of money, two you’re going to need multiple rounds and eventually lose control, or three you hire someone to get you the capital and they’re going to keep 50 percent of it for themselves. That’s reality.

I don’t mean to sound negative but I’ve been raising capital and working with micro caps for the last couple of decades. I’ve done what you’re thinking multiple times. If you’re not adept at the money side you will fail. Hell, not my current deal but the one before, I called it quits after maybe 5 to 5.5 mil. We just ran out of money.

best advice: find someone well off with a lot of connections to partner up with you. 50 percent of something is more than 100 percent of nothing.

excuse typos this is from my phone. Whatever route you go, good luck!

 

[flampton]

@Discordian @aggrofish both of you arenot harsh at all actually. I'm in the academic world currently and things need to be and are layed out flat.

What I'm seeing in the business world and recently the academic world is people want absolutely no risk. It's hard to get a research grant unless you already know your experiments will work!! It's insane. Now I understand business capital risk is put at the forefront, and dollars and cents. That's why we see a lot of stagnation because no one is rewarded until the product is hypothetically realized. Or the product is governmentally funded (your tax dollars) through academia development then the product is picked up by a company and the only cut the government gets is a taxed product. Oh and I said hypothetically because there are charismatic scammers who portray a amazing product before it's even close to being realized (Theranos, Juicero, etc.))

I can definitely work one prototype to patent, but the truth is that the foundation of the IP needs all three technologies. So I get one patent but still have nothing to push to market immediately.

So another option is I may proceed out in the open and establish the good will of the community to fend off competition. Basically the founder company and thus with proper communication the one to trust. At the very least this will push reefing forward even though I might be consumed. I mean I still have my 'real' career at this point.

Thanks for all your help everyone, it's been very thought provoking!!

 

[aggrofish]

If you can develop without patents you can realize a big advantage by being first to market. To your point of investors not wanting to take on risk: correct. They (institutions/IBs/angels, accredited investors/ VCs. Etc) want you to develop the business to a point where you don’t need them.

what you want is a guy that believes you. At the end of the day when you pitch your deal they either believe you or they don’t. All a real investors wants to know, in a high risk high reward deal, is money in - money out.

You want to hear three things:
how much?
how soon?
how sure?

if you get the investor to that point you will have money.