NACO is proud to announce the release of the first NACO Academy publication A Practical Guide to Angel Investing: How to Achieve Good Returns. Written by Dr. Steven A. Gedeon, the Guidebook is a practical and comprehensive guide to early-stage fundi...
Many Angels put more time into the company post-investment than they do pre-investment.
Interacting with your investee company matters! If the "average" Angel earns 2.7X,those who interact one or two times per year get only 1.3X while those who interact one or two times per month average 3.7X. (Wiltbank & Boeker)
NACO Academy Module 304: Best Practices for Angel-Backed Companies identifies four primary modes for interacting with a company: governance, metrics, money and network. In each of these modes, the Angels are seeking to proactively add value to the company.
This proactive approach is normally built into the deal and embodied in the shareholder agreement, and is in addition to any informal ad hoc involvement that individual Angels might have. (See, for example, section 1.6 – Level of Involvement, where someAngels say, "I give the CEO my phone number and expect them to call me when ever they need help.")
This approach to adding value is known as working on the company instead of working i n the company. It is precisely this ability to be more objective, strategic and focused on the big picture that adds significant value, instead of working on the day-to-day emergencies.
Of course, an Angel can also work inside the company as an officer or executive.But I'm looking at this topic from the point of view of the investor who is not part of the management team.
5.1 Governance and Coaching/Mentoring
Corporate governance refers to the formal methods required of the board of directors,whereas coaching/mentoring refers to the informal mechanisms whereby individuals interact with the management team, and usually the CEO in particular. A company must have a board of directors, and may also have an advisory board composed of industry experts and Angels who provide additional non-fiduciary advice, usually associated with sales, market and product development.
The Angel Resource Institute (ARI) summarizes the board's three main tasks as: 1. Never, ever, run out of cash! 2. Mentor, fire and replace the CEO 3. Sell the company
It recommends that the board's focus remain at the strategic level regarding these three tasks. At each board meeting, the board should formally review metrics tied to these issues. In addition, there are certain regulatory, duty of care, and duty of loyalty obligations. These duties and regulatory requirements become increasingly important as the company grows, raises additional rounds of financing, and generates more public information. (Huston, et al.)
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NACO Workshop Module 304: Best Practices for Angel-Backed Companies also includes the six major elements of principles-based governance:
