find your consigliere

6/14/2017 7 Comments

find your consigliere

As an entrepreneur, it is important to understand the role an investor will play in your business. It is also important to know what type of investor you need or want for your business. In the book, “Winning Angels”, it breaks down the roles of an investor to a startup into five categories.

A silent investor is an investor who role is to simply invest money into the startup. A silent investor is not looking to be involved in the business directly. They are looking to make a sound investment with the hopes of gaining a reasonable return on that investment.

Another role an investor can play is called the reserve force. From what I have read and witnessed, this seems to be the role of many investors. The investor not is available whenever the entrepreneur requests their help in certain situations or circumstances. The entrepreneur may seek advice on a certain deal or look for the skills and knowledge the investor may possess.

The team member role of an investor works directly with the company in a part-time or full-time role. As a team member, the investor can have a good or bad impact depending of the knowledge they have and the relationship between the entrepreneur. A good relationship would consist of the investor adding value to the company and fits into the management team. Having an investor as a team member can also hinder the startup. It can bring unwanted tension to the team and cause a strain on the relationship of the investor and entrepreneur.

I believe the as an investor the role of a coach can have the best impact on any startup. Entrepreneurs who are starting a company are the ones making all of the decisions and creating the vision for the company. It helps to have someone who has been there before and has the experience to bring to the table. It reminds me of the movie The Godfather. Even the Godfather needed a consigliere, an advisor, when he needed counsel or a trusted opinion on a problem or situation.

Lastly, there is the role of a controlling investor. If you are an entrepreneur starting the business then this type of investor will more than likely not work. The investor in this role becomes the head entrepreneur and takes control of the company. In my opinion, this type of investor could only work if the company is already established, is struggling financially as well as with the business model, and is looking for an investor to take control and turn the company around.

As an entrepreneur of a startup, you must decide what role you are needing an investor to play. There is an article from Business Insider called, “What startups should look for in an investor” which gives some good advice for entrepreneurs. The first thing an entrepreneur should look for in an investor is experience in the industry. This will be a great benefit for startups who are just being introduced into the market and industry. The second piece of advice is to find investors who are well connected and have a big network. Great connections can add so much value to a startup. The final tip is to find an investor who has financial strength. As a startup, you can only predict and project costs and sales to an extent. A startup may seek more money for inventory, additional costs, or to introduce new products or services into the market. Having an investor already a part of the company who is able to invest more is a real asset.

https://www.businessinsider.com.au/what-startups-should-look-for-in-an-investor-2016-5
Amis, David, and Howard Stevenson. Winning Angels: The Seven Fundamentals of Early-Stage Investing. London: Pearson Education Limited, 2001. Print.
http://www.madnessmomandme.com/wp-content/uploads/2011/11/The_godfather.jpg

7 Comments

Mary Schuler link

6/15/2017 04:52:27 am

Hello John,
I see your just going through this blog assignment so well. Each blog so far I have thoroughly enjoyed reading.
Types of investors is so important and I agree that an investor can and should be an asset by knowing and being familiar with the type of business you have. I think if a successful doughnut maker wants to invest in my Real Estate business and is the only money I can find is one thing.
Now if I can find a successful retired Realtor who wants to invest because he was successful is so much better because the knowledge and wisdom that he can bring to the table (and connections) could be very valuable.
I love the God Father photo and reference.
Have a great day!
Mary

sabrarch32

6/19/2017 10:00:59 pm

Hi John,
Its a struggle trying to find someone that is interested in sharing their knowledge about the industry with you without being to controlling. Depending on the investor and the risk they are willing to take can also play a role in how controlling they may or may not be. Do you currently have investors in your company? Or have you been searching for some? Check out BRAIN they are a local group of investors that may be able to assist you in your business venture. Also check out the Sequoyah Fund, located in Cherokee NC. They help business with seed funding.

Cece Krelitz link

6/21/2017 08:05:34 am

Hi John,
Love the reference to the godfather needing an advisor. Really what entrepreneur does not need some help be it financial, skillsets or connections? For me the key is for the entrepreneur to take a personal inventory of themselves and the startup to identify their advising needs before negotiation and structuring. Then during structuring and negotiating they can try to meet them with the right advising situation.
Cece

Brad Tanner link

6/22/2017 01:46:55 pm

Having seen many lousy coaches (personally and with my children) I am especially wary of that model. Many folks believe they are coaches but instead they are tyrants, apathetic, unfair, or plain incompetent. To me the "coach" label means I know the game better than you, so do what I say. With the exception of the NBA that is usually true. I think perhaps we should frame such people as "advisors." They do have expertise but they do not "run the team". I fear that someone who identifies his/her self as a coach can rapidly become a "controlling investor". And I agree with you that the role of "controlling investor" is best sought for when the company is in serious trouble

-- Brad http://blog.medstudentlearning.com/2017/06/getting-support.html

Mackensie link

6/22/2017 02:38:04 pm

John,

As an entrepreneur I also like the idea of a coach. To find someone in your industry that has the knowledge and skill-set for and wants to help you and your start-up. It is interesting that as an entrepreneur you look for what you want in an investor when usually it is the investor trying to decide if they want to contribute to a start-up. Great post!

Thanks,
Mackensie

Nick H

6/26/2017 02:03:03 pm

Nice post - of course, with the Godfather reference I hear the words "make him an offer he can't refuse" from potential investors! The controlling investor was not something I found as a desirable presence in my business. As you said, things would have to be pretty dire to go that route, and I would probably do what I could to avoid it. This is my first time to your blog this semester but it's got a very nice layout. Thanks for sharing.

Austin Parker link

6/27/2017 01:51:43 pm

"I believe the as an investor the role of a coach can have the best impact on any startup. Entrepreneurs who are starting a company are the ones making all of the decisions and creating the vision for the company. It helps to have someone who has been there before and has the experience to bring to the table. It reminds me of the movie The Godfather. Even the Godfather needed a consigliere, an advisor, when he needed counsel or a trusted opinion on a problem or situation."

I completely agree with this. Good advice can be the most powerful tool for a business leader. At the end of the day, a business is more or less dictated by the choices that the parties involved make. Great blog post, John!

Austin

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