{"id":236,"date":"2011-12-07T16:15:53","date_gmt":"2011-12-07T16:15:53","guid":{"rendered":"http:\/\/www.peterstromquist.com\/?p=236"},"modified":"2011-12-07T16:15:53","modified_gmt":"2011-12-07T16:15:53","slug":"contemplating-angel","status":"publish","type":"post","link":"http:\/\/www.peterstromquist.com\/?p=236","title":{"rendered":"Are You Contemplating Becoming an Angel?"},"content":{"rendered":"

(Caveat:\u00a0 I am not an attorney, accountant, or licensed professional in any regard; before contemplating any financial transaction, you should seek the advice of trusted professionals.\u00a0 The following is strictly my opinion.)<\/em><\/strong><\/p>\n

I saw an interesting deal this week which didn’t make me very happy.\u00a0 A second stage start-up that I am aware of filed for bankruptcy, of the liquidation ilk.<\/p>\n

My guesstimate is there is about 500k in debts from creditors; there are virtually nil assets, except some (possibly) items and fixtures that can be sold at liquidation to satisfy the creditors who may receive percentages of pennies on the dollar.<\/p>\n

Here’s the rub.\u00a0 The entrepreneur has provided a series of promissory notes dating back several years – that he lent money to the company during the start-up phase and is the only “secured” creditor, and thus is entitled to be in charge of the sale of the goods and receive the majority portion of the proceeds.<\/p>\n

“Legally”, there is probably some element of truth to this.\u00a0 Morally, not so much.<\/p>\n

Traditionally, while entrepreneur’s “skin in the game” is always the first money in, it’s also (supposed to be) the last money out.<\/p>\n

In the train wreck of this business, there will be a lot of very small vendors, employees, and advisors that are going to be hurt hard.<\/p>\n

It just doesn’t seem right.<\/p>\n

So the point of this post, is if you are contemplating an angel investment into a start-up, spend the money to conduct a thorough due diligence.\u00a0 Do not invest on a whim, or at the behest of a relative’s or friend’s pleading.\u00a0 Make a sensible decision based on facts and the information available to you.<\/p>\n

If you are offered a convertible note (often the case in start-ups), make sure you are\u00a0 listed as a secured creditor, with rights second to none.<\/p>\n

Ask for an ‘early buy-out’ clause, that is, if major funding comes along, you have the right to exit the deal early.<\/p>\n

You’ve heard it a million times – if it sounds too good to be true…<\/p>\n

 <\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

(Caveat:\u00a0 I am not an attorney, accountant, or licensed professional in any regard; before contemplating any financial transaction, you should seek the advice of trusted professionals.\u00a0 The following is strictly my opinion.) I saw an interesting deal this week which didn’t make me very happy.\u00a0 A second stage start-up that I am aware of filed… Continue reading Are You Contemplating Becoming an Angel?<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[19,28,29,1],"tags":[],"_links":{"self":[{"href":"http:\/\/www.peterstromquist.com\/index.php?rest_route=\/wp\/v2\/posts\/236"}],"collection":[{"href":"http:\/\/www.peterstromquist.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.peterstromquist.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.peterstromquist.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.peterstromquist.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=236"}],"version-history":[{"count":0,"href":"http:\/\/www.peterstromquist.com\/index.php?rest_route=\/wp\/v2\/posts\/236\/revisions"}],"wp:attachment":[{"href":"http:\/\/www.peterstromquist.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=236"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.peterstromquist.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=236"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.peterstromquist.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=236"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}