Messaging for founders and investors
The AANZ have put together below a few pithy points about what it’s important to remember in the current challenging climate. Feel free to lean on these, use them in your own coms or let us know if you think we’ve missed anything critical.
Suggestions for right now for all portfolio founders to help them focus on the right things to protect their venture
- Engage customers … be proactive in supporting them to ensure best chance of being paid. Engage with the CEOs of those customers. Churn costs more than lost sales. Segment your customers. Who is likely to be in business in six months and who isn’t? It’s harsh, but invest in those likely to survive
- Retain staff … both for the company and wider society it is critical we keep people in work. This needs to be a balanced approach and effort that is shared by shareholders, the government and the company. But look to reduce hours or find other ways to reduce staffing costs
- Extend cash … develop tactics to reduce costs as well has accessing funding to bridge from survive to sustain to thrive. The sustain piece is important. This will pass. And companies that get out the other side will be a in powerful position.
- Preserve value … weigh up short term loss versus long term gain with a view to leading the recovery. Out of chaos comes opportunity – every time there has been an economic downturn (1929, DotCom bust, GFC) some massive companies have been created including Xero, Lanzatech and Vend.
Suggestions for founders who are thinking of raising or who will need to raise in the next six months
- research and know your investors – it’s all about relationships, now more than ever
- so reach out personally and individually – offer vidconf updates, be authentic, be empathetic
- if you were thinking of using a convertible note, SAFE or KISS then switch to equity
- think about valuation resets – but be sure it’s in the context of your (revised) capital strategy and ensuring that when you get to a liquidity point you still have 30-40% of the cap table
- think about what investor friendly terms you can offer – but give more emphasis to economic terms (eg full ratchet anti-dilute and preference shares) than control rights (eg letting the investor director be totally in control of hiring and firing or imposing unreasonable limits on how and when the company makes expenditure decisions)
Suggestions to investors
- the rationale for angel investment remains as valid today as ever – from a head and heart perspective. From a ‘head’ perspective valuations will be down and the ROI that much higher out the other side. From a ‘heart’ perspective you are helping to grow businesses that are creating great jobs and making the world a better place.
- be aware of emotion overriding reason – don’t feelings of scarcity chew you up
that said, angel investment should only ever make up 5-10% of your NET wealth
- review your portfolio to assess which ventures have the best chance of surviving, sustaining and thriving
- make value based decisions – back founders growing ventures which are truly additive to the world, which are developing products and services people genuinely want and which have sound business models
- support the founders you’ve backed – say yes or no quickly, even small(er) cheques can make a difference
- be generous with contacts, intel and emotional support
- you’re an angel investor, now is the time to act angelically !!