10 Critical Lessons Before Writing the Check

Blake Patton’s Insights for Early Stage Investors

I am a fan of Blake Patton. I respect him as a husband, father, community leader and friend. He is also this year’s local keynote speaker for the October 6th Atlanta High Tech Prayer Breakfast. Blake started Tech Square Ventures three years ago. In this short time he has:

  • Raised Tech Square’s initial fund
  • Tapped into some great mentors to guide him and his fund
  • Capitalized on his network to ensure “first-look” deal flow
  • Invested in eight great entrepreneurs building great companies
  • Partnered with some excellent angels and VCs on deals
  • Served as the advisor for the vision, design, and establishment of Engage at the ATDC.

I run an angel-only luncheon group called Angel Lounge at the ATDC. Its purpose is to help angel investors become better early stage investors. We do this by choosing a topic and inviting an experienced angel to share his/her experience and then the rest of us share ours.

We learn from the experience in the room. It is a fun and informative meeting with committed angels sharing their war stories and successes.

Top 10 Insights

Recently Blake discussed what he’s learned in his three years of investing. He shared using his southern charm bookended by his Georgia Tech confidence and competence.

As usual, his insights were so good I wrote them down to review. If you’re an angel or an entrepreneur, I think you’ll agree.

  1. You must have an investment thesis. Invest in what you know.
  2. Early stage is all about team, market and timing. Due diligence should not be a drawn-out process. There is not much there there.
  3. Think regarding milestones, not to-do’s. Milestones are monuments indicating reduced risk in the venture.
  4. Early stage investors should be viewed by the entrepreneur as partners in the business.
  5. Measure success by internal rate of return (IRR) not multiple of investment returned (e.g. ten yrs with 10X exit is 26% IRR vs. five yrs with 5X exit is 38% IRR).
  6. Time management is the biggest challenge for a lead angel investor. Focus on what you are good at and on the right people and markets with the right timing.
  7. Whom you invest with matters a lot. Your partners bring value beyond money. Investor alignment is critical to an enjoyable business life and profitable deal.
  8. An effective seed-stage CEO is a visionary. A CEO with this skill is best suited to get the company to product-market fit and revenue.
  9. Reserve twice your initial investment for follow-on rounds. Early stage investing is not a one and done.
  10. Write an investment memo before you do the deal. This is a great way to learn as you can look back and remember the assumptions you made in doing each deal. This will make you a better investor.

Wisdom for Entrepreneurs

This list was meant for early stage angel investors. But it also should be understood by entrepreneurs seeking funding. A competent angel will manage his personal investments using this list.

As an entrepreneur, help your investor check these boxes, and you will be a great partner and so will he.