What a Weary Entrepreneur Taught Me About Angel Investing

I was speechless. The entrepreneur, Randy, had just said, “I don’t want to do this anymore.” It was 1995, and I had backed Randy in starting a professional services company. “I don’t like worrying about payroll and cash flow all the time. It just isn’t fun.”

When I invest in a raw startup, the entrepreneur is Plan A and there is no Plan B. If Randy walked away from the business, I would lose the $650,000 invested in the business plus closing costs of another $600,000. I would then have to find a job to support my family. He was making a life-changing decision for all of us.

I said, “You can’t leave. You are the business. The people you hired are all your people. The clients are yours. We finally just hit $1 million in revenue. There will be nothing left.”

Something to Think About

Randy said, “I understand, but this is not what I thought it would be. I am just not enjoying this. I want to go back to leading a professional services organization for a bigger company. I want to focus on the work and not building a business.”

“Take some more time to think about this. The impact is too great to just walk away. The business just reached break-even, and it can grow into something meaningful. Please reconsider. Don’t throw away this opportunity and what you’ve built over the last 18 months!”

That night I went home, changed into my jeans and sneakers and went for a walk. I was railing at God during the whole walk saying things like, “You put me and Randy together and now you are going to pull the rug out from under me? I thought you wanted me to do this angel investing, and now I’m pretty sure you don’t. Talk to me. Help me out of this.”

Randy came back the next week after a trip to the west coast and asked me to come to his office. I was thinking, “This is it.”

From Despair to Elation

Randy said, “I was meeting with my contact at PeopleSoft and told him what I would like to do with my career. My contact told me that he would like to buy my company. He liked me and my people and thought our middle market services methodology will prove very profitable for PeopleSoft. What do you think?”

I said, “He wants to buy the company? Really?”

I left Randy’s office and asked Robert Campbell, who was working with me at the time, to come to my office. Robert was the former VP of business strategy for Shareholder Systems in Atlanta. They were a fast growth firm mainly from acquisition. Robert did all the acquisitions. He was an expert, and he was sitting in my office.

I asked Robert what he thought. He said “I think it makes sense. Let me make a call to Randy’s contact and see if this is for real. If it is, then I’ll negotiate the deal and get it done.”

It was all moving faster than I could keep up. Robert made the call, and within 60 days the company was sold to PeopleSoft. The deal brought me from the depths of despair to the heavenly heights of elation. Randy’s company sold for $4.2 million after being in business 20 months. Everybody made money, and Randy and his team got their wish of working for PeopleSoft.

5 Lessons Learned About Angel Investing

  1. Be sure the entrepreneur has no Plan B. This is what he is called to do.
  2. Work with people who know what they are doing. Randy and Robert were recognized experts in their fields.
  3. Others may see value even if I don’t. Who am I to judge?
  4. Timing is everything.
  5. God is in control, not me.