A reflection on “Winning Angels: The 7 Fundamentals of early stage investing” by: David Amis and Howard Stevenson
What did I just read? This section has been the most confusing to me so far. I hope that I will not have to fully grasp it in order to understand the remainder of the book.
There were two things that made this difficult for me to understand, they were talking about the stock market (shares) and there were a lot of terms that are not in my business vocabulary…YET.
What I was able to understand is that there are three fundamental structures for business terms. The structures may have an exit impact, relationship impact, downside protection, upside protection, entrepreneur protection, worst case scenario, and notes and suggestions.
I am tempted to end my reflection there, but I am going to talk through this. As I was reading this section, my main thought was: if this doesn’t make sense to you, hire a lawyer.
The upside to having an attorney on your side during the structuring phase (as well as negotiations) is that a component and seasoned attorney has he resident knowledge of hundreds of deals related to your interest. They will be able to provide you with sound advice that will protect your interest in the long run.
What I also took away from this reading is that some investing angels believe structure matters and others don’t. In general, I thrive in situations where there is structure. There is a basic understanding of what all parties desire. No grey areas.
My last thought. I would love to see an updated Amazon.com’s structure, especially in 2020 post pandemic since they are DOMINATING the business world. On thing that I know for sure, whomever trusted Jeffrey Preston Bezos in 1994 is living a very happy life. Whomever did not accept or trust his structure is very, very sad right now!
Elaina, I think the same thing with each chapter I read. There’s some very difficult things to grasp in this book. The one thing that I’ve gleaned from reading is that simplicity is a recurring theme. That’s true with structuring as well it seems. Keeping it simple tends to help business succeed. Now in the case of a business like Amazon, I’m sure the structure gets more and more complex as the investment rounds occur.
Tripp,
Absolutely. Keep it simple are the realest words that were written. It is truly relevant to most things, especially business, like you said. You’re right, Amazon had a simple structure at one time and boy did it pay off. Now, I’m curious to know what the investment process looks like. I’d love to be a fly on the way during those meetings.
Elaina
Elaina,
I’m with you in that this section took a lot of reading and re-reading to understand! I am not a savvy investment person so I had to flip back to understand the trms multiple times. That beig said I think, like negotiating, it makes sense to have a partner or a lawyer teach you the ropes on something so important in founding a business relationship with someone!
Jake,
I am so glad to hear that I was not alone! I had to reference the terms often, as well. I am always up for a challenge, so it was a little frustrating, but I found the section to be added value/information in my life!
Elaina
Elaina,
I also work better and am more productive in a structured environment. I believe that structure helps you stay on course and is a blue print to future goals. This was a difficult chapter to comprehend and had a lot of information to digest. I enjoyed reading your post.
Best,
Shannon
I also found this chapter to be a bit difficult, but that is the great part about being in a learning community is seeing how each other person interpreted the text. It is definitely worth it to partner with other investors, or hire an advisor to help you through your first few investments. I think the most important parts are do not be greedy and ruin the relationship with the entrepreneur, and do not make it complicated because it will make other future investing rounds more complicated.
If it helps here is my blog post on this section, would love to get your feedback
http://forgedfilament.synology.me/2020/06/28/ent-640-structuring-a-investment-deal/
Jacob!
Thank you for sharing your thoughts and also your post on structuring. You really did a great job with outlining the benefits and options for structuring.
Elaina