Angel Investments in the Czech Republic – A Divine Idea or a Gift from Hell?
Maybe you have considered launching your own startup. Maybe you have already launched one (or several) and maybe you have already set the world on fire with it. But maybe you just enjoy observing the chirping around young businesses. In any case, you have most likely heard of them. However, behind almost every startup, whose founder does not have a rich uncle who would write him a blank check, in the beginning, there is a person who believes the idea and offers his own resources and experience.
Yes, we are talking about those for whom the term business angels has been adopted in recent years. And even though they are, in the startup area as constant as success or failure, not everyone knows how these investors think and what an angel investment entails for them.
When it comes to startups, the equation is quite simple. At a time the founder only has the idea, he has to look for a source of financing. He can borrow money from a bank. He can use the house of his parents as collateral, the bank is interested in nothing but the installment, and the founder seems to be calm about developing his idea and his company. Until it stops succeeding (which is, with a startup, unfortunately to be expected). Or he can come to an investor and sell a part of his idea. And when he meets the right one, he gains much more than just money.
For the investor (but also for the founder), angel investment is something like a marriage. But there is a difference. When something goes wrong in a marriage, the two can, put simply, walk away from each other. They split their furniture, their car and they go their separate ways. Unfortunately, getting divorced is not allowed in investments. Once you have a stake in a company, you have to take care of it whether you are doing well, or whether you are going downhill. You have a responsibility for it. Americans like to say: It is business, it is nothing personal. For an angel investor, every investment is personal. She does not offer money from a fund she only manages for someone. She offers her own money and experience she earned and gained, usually with a considerable effort. She offers all of this because she wants to help another company grow and succeed, because she believes the founders and their idea and because she believes she might create new job opportunities for others in the future.
Frequently, the investor invests her resources and enthusiasm into a mere vision. Therefore, it is crucial for her to know who wants to fulfill this vision and what their plan is. She cannot look at numbers because these usually do not exist yet. The more she needs to understand the way of thinking of the founders. What part of their idea they want to make money on and how they want to achieve it. She asks about the experience of the founders, about their strengths and weaknesses, what they are experts in and what is not their strong suit. Whether, if successful, they are able to run a growing company. Only then she puts her own money on the table. She also starts to carry responsibility because she becomes a part of the company. She can no longer hide or make excuses.
Nonetheless, a business angel can never only offer her money, that would not be too different from a bank. She mainly offers her experience in building a business, often not just one. She can help the company avoid making the same mistakes she may have made before. Her contacts open the door to not easily reachable places for a beginning entrepreneur himself. And why does she do that? Because now she is a co-owner of the company.
Even though the meaning of the term does not suggest much, the business angel does not invest only out of goodwill. She is not just a sponsor. The business angel wants to help the startup, yet at the same time she expects that the high risk of investing in a mere idea will be, if successful, balanced by a corresponding return. She requires hard work because she has already fulfilled her part of the agreement - she has provided the company with the means for further development. As a result, she expects the rest of the company to do their part and to give the best they have. She does not grant subsidies to nonworkers, but she invests her own money into a potential and a good idea.
And like an angel - if it works out, it is divine. If not, it can become hell.