ENT 640 Supporting and Harvesting
I think that supporting is the most important section in the book Winning Angels the 7 fundamentals of early investing by David Amis and Howard Stevenson. I have started off small so I did not seek out capital, but I have needed advice. The section on supporting broke it up into five roles.
The silent investor is purely a financial investor. This investor will take no active role in the company. This person stays in the background and hopes for a return on their money.
This investor will provide capital and help as requested by the entrepreneur. This investor will provide advice and benefits from their experience if requested.
This investor works in the company. If the investor has a stake or majority interest, they could possibly try to manage the entrepreneur. This could definitely create conflict.
As an entrepreneur, the coach is probably the most important supporting role in my opinion. The coach provides support, advice, and any assistance needed. Having a coach is crucial to the success of a new venture.
This is an investor that becomes the entrepreneur by buying or taking control. This investor runs the company.
Supporting is a huge function in investing. Having an investor that is knowledgeable and interested in your company helps an entrepreneur succeed. An entrepreneur that is new to a business can really benefit from a coach. Many entrepreneurs think that asking for help shows weakness. I think asking for help is a key to success.
The book concludes with a section on harvesting. Getting a return on your investment. This is what the winning angels investors strive for. The book outlines seven methods of harvesting.
The company distributes cash directly to the investors regularly. It usually takes a while to see a payment but over time could provide a steady stream of income.
This is when the investor’s stake is sold. This is usually a quick way to exit an investment. According to this section, the investor could realize 3-4 times profit on their investment. The investor could also see no profit.
Initial Public Offering
The company sells a percentage of their shares. This makes it easier for the company to raise more capital but many times investors have their shares on hold for six months.
The company is sold to buyers based on its current and expected cash flows. The value could vary but this is pretty low risk.
This is usually the best harvest method for a company. The buyer usually pays value above what cash flow suggests. They are usually looking for value beyond the cash flow. The returns to the investor could range from 10 to 40 times their investment.
The company is reorganized and gets a second chance. Investors may not fare well.
The company is liquidated and the investors usually get little or nothing.
At my current age, I see the walking harvest as the most dependable return on your investment. I am a low risk kind of investor. It would be nice to draw dividends off of a company’s profits monthly.
In conclusion of the book, Winning Angels the 7 fundamentals of early stage investing, I must say that it was power packed with wonderful information. This is one for the library to refer to later.