Miles To Go.

Charlie Green, author of Trusted Advisor

(MS) Since there is so much buzz around Sharing, (I’ve written about it recently here, here and here) and it’s key component, Trust, I’ve asked some experts to lend their opinions on my blog to fill out the color commentary. Here’s Charlie Green;

Whether you call it “the sharing economy” or “collaborative consumption,” there’s a fascinating new economic and social phenomenon going on.  While not identical, both terms refer to markets for the sharing of products and services between individuals.

It may seem obvious that the role of trust is pretty critical. But just what that role is turns out to be not so obvious.    

Background

The chroniclers of the movement are Rachel Botsman (Botsman & Rogers, What’s Mine is Yours), and Lisa Gansky (The Mesh: Why the Future of Business is Sharing). Botsman characterizes three sub-markets: product-services systems (like ZipCar), redistribution markets (eBay), and collaborative lifestyles (CouchSurfing).

Some of those sub-markets hint at huge scale economies: how many zillions of available-seat-miles go unused on the nation’s streets and highways on driver-only trips? How many available car-hours per day are actually used for driving, as opposed to uselessly hogging valuable real estate? And for nearly every traveler vacationing, there’s an empty house back home going unutilized.

Other sub-markets are more akin to intriguing social experiments: imagine a global foreign exchange student program run for adults, only faster, bigger, and with do-it-yourself vetting, and you’ve got something like CouchSurfing.

In an odd way, “markets” is precisely the wrong way to describe the social experiment part of the phenomenon – it’s anti-market, in a sense, to focus on collaboration and reduced consumption, rather than on increased sales and  intermediating exchanges.

But in more traditional senses, these are very much markets, with loads of interest. Technologies are enabling peer-to-peer interactions; but unlike stock exchanges and book-buying, many of them exist to facilitate real flesh-and-blood interactions. Subletting your house or apartment to someone, or simply hosting an out-of-town visitor, is no trivial social exercise. And lending out your car or tools, while not necessarily social, also involves a social risk.

Which is where trust comes in.

Trust in the Sharing Economy

If you’re going to open up your house to someone you’ve never met before, you will make some form of trust calculus about the possible guest.

The reverse is true as well: if you’re going to go spend some time as the house-guest of a perfect stranger, you also will make some assessment along the lines of, “Do I, or do I not, trust these people?”

Might there be a secondary market here for trust. Indeed, there might.  (Disclosure: I have a small relationship with one such venture, TrustCloud). Suddenly, the decision to trust has economic, and possibly very personal, consequences.

Trusting and Being Trustworthy.  People often talk about “trust” as if it were a single thing.  It’s not.  “Trust” is the result of a trustor and a trustee arriving at an agreement. Trusting is not the same as being trusted. Trust is, if you’ll pardon the abstract language, an asymmetric relationship.

To be clear, the one doing the trusting (the trustor) is the one taking the risk. If I loan my tools or house to you, you might abuse them. The trustee, by contrast, takes little risk.

The trustor’s decision is based partly on the perception of the trustworthiness of the trustee. Wouldn’t it be great, the thinking goes, if we could come up with the equivalent of a FICO credit score for would-be trustees.

The search for trustworthiness metrics goes in two directions. One is reputation;  the other is behavior. Reputation is relatively easy to assess; unfortunately, it’s also easy to game, and can easily be confused with notoriety. Kim Kardashian may score high on reputation, and even influence – but does that mean you trust her?

Behavior is harder to game: to fake behavioral dependability, I would have to establish a track record of dependable behavior – which is, after all, the point. It can be faked, of course, but such an elaborate con requires a level of effort quite out of proportion to the benefit, not to mention out of character.

Trusting. It’s easy to focus just on measuring trustworthiness, particularly in the product-services and redistribution markets, where the trustor wants information about the trustee to mitigate downside risk.

But in the collaborative lifestyles segments of the movement, it’s not just the trustworthiness of the trustee that is important, but also the trustor’s propensity to trust. In the fascinating sub-movement that is Couchsurfing, the parties aren’t just looking to cut risk: they want upside potential in terms of fascinating people willing to take social risks in order to meet others. They want trustors.

The 60s Redux?

The parallel with the 60s is instructive. Some of the era’s social experimentation didn’t make it out of the 70s. But the Beatles, Steve Jobs, and the Grateful Dead were all once-radical types who created models that are mainstream business today.

Even the hard-core economic segments of the sharing economy aren’t as radical as we think. The timeshare industry “shared” underutilized vacation home capacity; so did distributed computing in the 70s-80s. McDonalds’ discovery of breakfast was another capacity utilization play that paid off big.

In any case, we’re all going to be talking more about trust. And that’s likely a good thing for us all.

Mom always said sharing was good.

I am asked a lot about my investment criteria, but lately many of the questions have focussed on my criteria in the sharing economy. This is pretty amazing, because less than a year ago, I could not have told anyone what the sharing economy was.

Now sharing is something I do love, as I abhor waste and adore ways to get more out of any asset. Ask my wife.

In the past year, a movement has surfaced that is global (big) , reflective of our economic state (sucks), green (uses our planets assets more effectively), driven by a connected group (mobile powered millennial), and highly disruptive to a bunch of  old models of doing business. It is alternatively called the Sharing Economy and Collaborative Consumption, depending on who you ask. I like the former because I have a hard time spelling the latter, but either will do.

But overall, there are big and sustainable trendwaves. The kind that I like to ride. (Disclaimer: my favorite investment in sharing so far is TrustCloud, probably). So, within the Sharing economy, this is how I break down the key ingredients to my angel investing options:

Networks or Platforms: Many winners, or winner takes all. This is emerging as a very big theme for me, and depends on what stage one enters the market development. I believe every new trend breaks into two types of opportunities; networks within a trend become a story of many winners. For reference, look at the online ad nets, with plenty of $100M+ businesses. Look as well at the mobile ad-tech business, and the several winners to date in the networks (Millennial Media’s monster IPO, and sales by Admob, Quattro, even Amobee). Now look at the platforms that sold picks and shovels in ad-tech: Atlas ($6B), DoubleClick ($14B or $3B, depending on who’s counting) and the incumbent adserver in mobile (another Vaux investment, I wrote about here).

The point is, the networks are great businesses that scale quickly and become an exercise in good sales and marketing systems. The barriers to entry are low, and scale counts. But margins erode at the top end of the scale, because they rarely have a technology platform underneath. I’ve seen it before, trust me.

On Leadership: Bold enough to be early, seasoned enough to run a fortress. In an age of SUPER angels, I am anything but. I don’t have the braincells or the checkbook to attempt 500 startups, the coding passion of prgrammer king FAKEGRIMLOCK, or the patience to do the TechStars or Foundry stuff. But I have the courage to be early and the capital to be patient. So when we latch onto an idea we like, I can land on a beach with a team of Startups SEALS, secure a niche and talk my way inside the castle walls before claiming the fortress to support a large organization. Teams of five are fun, teams of five hundred are awesome. I’ve led both. As such, passive roles and stakes just don’t excite me. Frankly, they distract me.

Karma: Makes me feel good, as in “I did that!” To be frank, I think the best monuments in the world are contained in the Emerson Poem “If” (that my father recited at my wedding, amazingly). To have made the world a better place, even in subtle ways, is sure gratifying. To point to a logo, an event, or even a business process and say “I helped to build that” is really special. Sharing makes me feel that way. Up top now, anyways

Lean: develop a product for $250, acquire users for $250. Scale with real capital. These days, I gravitate to digital media because it doesn’t cost much to develop a product that solves a need. (and almost all the proceeds are for just that- product). Then, a little more to ramp users, again within angel range. But sooner or later, most digital media companies will need big capital to scale, which is where access to VC (where I have again been blessed) is key.

Partners: Coachable entrepreneurs. I’ve said it before, and each day it gets more relevant: life is short, and I have long ago given up having to work with buttheads (knowingly). While most of the entrepreneurs I work with are younger, they all possess a common thread and that is the thirst to learn and the courage to recognize and work on their mistakes. It helps not that I am the most direct guy around, so the chances for setting people back is always there. But I speak the truth, and I always speak the same in front of people as I do behind them.

Of course, there are many more criteria for selecting a sharing business, but these are some that ring true. I will be discussing them with a panel next month at the Shared Squared event, and I’m sure there will be more added to it.

Oh, one more reason I like sharing: my mother always said it was kind.

The Social Network is a hell of a movie, but the real people upon whom the characters were based have stated that the film’s version of the founding and growth of Facebook was overly dramatized. And appeared way more fun than it actually was.

Face it, entrepreneurship is hard. Angel investing is doubly hard. While we read about spectacular successes, one can hardly keep up with the many outright failures preceding them. The thin veil  can really only be perceived once you are on the right side of it-it’s practically see through! But if you are on the wrong side, the thin veil might as well be a brick wall.

Someone once said the two best traits an angel investor can possess are a strong stomach and a sense of humor. The strong stomach will tolerate its share of quick deaths from being too early, too late, poor execution or leadership, lack of funds, or just tons of competition. The sense of humor will come into play when you attempt to tell your God which element of your portfolio is going to be The Big One. God will invariably laugh and throw at least one thunderbolt, wreaking havoc with your “sure thing” — but turning your also-ran into a winner. (No kidding, it’s happened. But to protect the innocent, we won’t name those we feel were luckier than they were skilled.)

Other sources of angel heartburn include those frustrating periods of illiquidity…the fast pace of technology which upends business models and proprietary positions quicker than at any time in history… the global markets bringing competition to one’s door on a massive scale… the high valuations of exposed deals,…the lack of influence when part of a syndicate…the competition with other angels (and now, VC’s). The list goes on.

The angel game can be summed up in the words of the “advert” placed by explorer Ernest Shackleton (1874-1922) ahead of his Antarctic expeditions (none of them successful, by the way):

“MEN WANTED FOR HAZARDOUS JOURNEY.

SMALL WAGES, BITTER COLD, LONG MONTHS OF COMPLETE DARKNESS.

CONSTANT DANGER, SAFE RETURN DOUBTFUL.

HONOR AND RECOGNITION IN CASE OF SUCCESS.”

And yet, we do it.

Doug Krugman, Greg Matusky, Roo Rogers, (M) and Xin Chung @S2 Learning Even

the woods are lovely, dark and deep
but I have promises to keep
and miles to go before I sleep
miles to go before I sleep

Robert Frost, in a poem of simplicity itself, captures the essence of the foundations of trust: promises kept.

I was at Shared Squared NYC’s monthly learning event last night, where a whole lot of people made good on a whole lot of promises. And there was lots of chatter about trust, as the social networks have spawned so much peer to peer interaction (and the P2P has spawned its share of weird interactions).

In short, the problem that is emerging is that people, for better or worse, form  judgements based upon online information, make promises and commitments, and then are disappointed with the related offline episodes. Happens all the time, across a variety of peer to peer actions. There are a gazillion examples of the difficulties of this toggle, like

• Lady GaGa tickets bought through Craigslist for cash at the last-minute
• A Wimdu rental, where the pics were great, but the pillows just plain smell.
• A RelayRide renter who changes his plans last minute and screws up the rest of your calendar

But the upside of getting trust right in the sharing economy (and in P2P lending, and in dating, etc etc.) is that more trust leads to more and faster transactions and interactions within a community. I think Stephen MR Covey (son of 7 Habits Stephen) had it right quite awhile ago when he wrote The Speed of Trust. You can add his good work to these recent pieces on the subject:

• The Trust Projects recent manifesto…
• Letters and outreach to the community by Scaffold and Legit
• Neal Gorenflo doing everything possible to forward the sharing conversation via shareable (Nice work!)
• Shared Squared finally announcing an event calendar in NYC

But, at some point, in order to truly scale, I really passionately believe the sharing economy must deliver an indicator of trust between the two parties in a transaction increases if not ensures the assets at risk. The only product in the market that is out there, doing it today and in increasing numbers with both communities and users is TrustCloud. (You can claim your TrustCloud here). And yes, I am an investor and have blogged on the topic here, here and here.

Eventually, they will be compelled to ensure trust is sufficient. And just as airbnb has done, others will need to underwrite that risk. People- and perhaps their insurers! – will want better answers to questions like:

• Will my car be returned in good order?
• Will my apartment be sacked while a couchsurfer is there?
• Will my boat he left on the rocks by this drifter that borrowed it?
• Is my daughter safe with this tutor who comes to the house?
• Will I ever see my lawn mower again?
• Will this ride share going to get me to work, or roll me out of the car in Mexico?

And all that attention has forwarded the discussion, but trust is not an absolute from the get go. We as humans observe behavior and actions before trust is earned,  and we frequently reassess trust levels along the way. It can work between online and offline as long as it is observed, recorded and elegantly presented in context.

So, not unlike the man in Frost’s Poem…

The accumulation of recorded behavior, events and affinities that leads to the confidence to exchange something of value, tangible or intangible is IMHO the most accurate and applicable definition of Trust that any P2P marketplace can rely on.  

And this is why, simply, behavior trumps reputation every time.

PS: I’d love to hear what you think of the new TrustCloud. Enter your comments below, or on their site. Mine is above at the top of my blog.

EO: Great Group of Entrepreneurs

This excerpt is serialized from a whitepaper titled Angel Investing for Single Family Offices (SFO’s) by The Family Office Association and Vaux les Ventures. For a complete copy, visit the FOA website. 

Any SFO considering allocating a portion of their assets in venture toward angel investing has to acknowledge the significant risks in the market. One sobering take from the US Small Business Association is that roughly 80% of small businesses fail in the first year, 10% in the second and 5% in the third, leaving a paltry 5% of new ventures that even qualifies to deliver a return for investors. I am a member of EO (logo at left), a global organization with 8,000+ members that fosters entrepreneurs, and the odds are just slightly better there I think.

Sticking with the digital media businesses discussed in the last section, here’s a brief summary of the early stage venture risks associated with this sector:

Operational Risks are legion in startups. First out of the gate is execution on the development of the product. Many products and services simply fail to launch, whether due to poor specs, loose design
concepts, or from just plain misjudging a market need. Another common problem is never solving the cold start challenge and acquiring users. Assembling talent, accessing sufficient capital, maintaining differentiating advantages over competitors, and a go-to-market strategy are a few more risks to consider.

Timing Risk — also referred to as Luck. Often, an entrepreneur’s vision has merit, but market conditions have not yet gelled to support it. Frequently, capital is wasted on development and/or marketing in
anticipation of a developing market. When the tide doesn’t rise in time, the company is left high and dry. One example? The many mobile/ social networks that tried to deliver hyper-local advertising audience and failed. In the meantime, Gowalla and FourSquare entered the market just as mobile and social converged, and were propelled to higher and higher market caps. Likewise, any mobile/social solution launched now with similar attributes would be too late and face heated competition.

Funding Risk can be mitigated by an SFO in the early stages of the company, but in our digital media example, additional capital will be needed — or at least easy to acquire –in order to scale the business. A good example of funding risk affecting returns would be the inability for mobile ad networks/ platforms to raise capital before mobile was “proven” viable (see AdMob’s sale to Google and Quattro’s sale to Apple within a 6 week period). Before those landmark deals, funding sources constantly questioned whether there was a “real” market in mobile, citing the struggling networks who hadn’t succeeded, despite $250,000,000 of combined capital. Several early stage companies faltered for lack of capital, and several other investors suffered dilution from large downdrafts in valuations. An SFO can, of course, prolong the agony by continuing to fund (Fred Wilson’s famous quote here is “I have a 0% mortality rate- I just keep funding!”) but the effect on returns when others do NOT fund, or fund at lower prices, is undeniable.

So, if you are considering angel investing with your SFO be sure to match the risks with the rewards. There are more of the former than the latter!

 For a complete copy of the complete paper, visit the FOA website. 

Holy crap everything is mobile now

Don Draper and the Mad Men gang from Sterling Cooper return Sunday on AMC’s four-time Emmy Award winner, after a seemingly interminable 17 months away.

But a lot has changed in the 17 month hiatus. Not with the sixties, in which the show is set, but the ‘teens in which it is viewed. The Mad Men of the show were trying to grapple with the new medium of TV, which was a big departure from how people were spending time, and how advertisers spent money. They had a raw take on manliness, and a pretty much anti-PC bent to everything that transpired. I’ve written about it before (relating to another Vaux investment). They also wear pocket squares.

But in the here and now, the M’ad Men are on the scene (that’s Mobile ad men, and I’m among them) and there is another mass transformation in process.

Let me try to explain it this way: there is a scene in an early episode where John Hamm’s character driving upstate, listening to the radio (speeding, with a drink and no seat belt but that’s considered period charming). He hears a traffic report (backup on the bridge), and dismisses the information (ending up in a caught in the same). It was just the beginning of how ad-supported media would become capable of delivering information that is both timely and relevant, if not always used.

Today, a larger and larger audience will hear of Don Draper and Mad Men, watch his show, and comment on his show through mobile devices. It is the harbinger of the greatest transfer of time spent since the TV entered Don’s creative agency: out of no-where, people are now spending 10% of their total screen time on a mobile device. People are starting revolutions, looking up recipes, avoiding disasters, and of course watching MadMen videos on mobile devices. It’s going to get a lot bigger, at the expense of most other media out there. There are a few billion mobile devices in the world today, and it’s still growing.

I believe it will set off the greatest traffic jam of all time, in a digital media sense, anyways. Heres how it happened, in grossly oversimplified terms only I could dare to paint!

The publishers may have figured this out first. Companies like Time Inc, ABC, NBC Universal saw their audiences begin to shift. As their inventory of available pages evolved (aka circulation, or eyeballs in digital media speak), their mobile strategies got serious. They monetized through ad networks (see below), then other point solutions (see below also), some even tried to get online ad-networks to work in this new medium. Finally, they concluded that they needed a platform to run and maximize the yield on their entire mobile inventory. Lucky for them, there was one that served their needs.

The Early Mobile ad Networks were the first prospectors in this brave new worked of mobile, and they did well, stringing together exchanges of advertisers and publishers and taking a cut for matching them up. Though a hard business to differentiate in, the early winners were great exits. Enpocket to Nokia for a couple hundred. Third Screen to AOL for a little under fifty. Quattro to Apple for almost three hundred. Admob to Google for over seven. There are several more.

But a funny thing happened in almost all of those acquisitions: I truly believe the buyers really thought they were getting a technology platform that they could scale across their larger organizations, so they paid up. We’re talking billions of dollars in the hopes there was some tech under there somewhere that could give them a commanding lead in mobile.  But when I look at what those buyers are doing with the assets, I have to conclude they all didn’t get that. Not even the recent S-1 filings are all that impressive when it comes to ad tech. Facebook even acknowledged it as a risk- 122 times in their filing.

The point solutions came next into the market, trying to get attention (from anyone!) with their latest idea that would revolutionize mobile. Mobile Thumbprint (the equivalent of an internet cookie), video, full screen takeovers, SDK’s, app networks, real-time bidding and every other feature and business process under the sun has launched, and maybe saw Series A funding. Some were just too early. Most of them tried to give away the farm to get clients, and the VC money won’t last long with that model. Many are starting to top out, and will soon realize they have to bolt onto an enterprise with scale and relationships. It’s not going to be a pretty story as they get caught in the rush.

The Social Networks and social gamers have grown large and influential, but they too are noticing a problem- their audience is spending more and more time on mobile. Facebook is a game changer of epic proportions (here’s my take on a portion of that story) and they have massive advertising revenue from their online sites, but most of the leaders in the field have not figured out how to monetize mobile. If the trends continue (doubtless they will), they will be lined up at the mobile bridge in no time.

The Online ad networks may be themselves facing a rude surprise soon enough as more of their audience bolts to mobile. Online ad servers didn’t translate to mobile for a few very simple reasons, none of which I am about to give up here. But it doesn’t work, or it hasn’t until now and the bigs have been losing customers left and right because they could not get some basic mobile parameters to work. They need a bridge to mobile, and they will need it soon. Tailoring the existing online platforms hasn’t worked. They will need a bridge.

And so, the traffic jam begins to form at the bridge to mobile ad serving. Hundreds of online ad networks have to deliver on a mobile solution, but theirs have not worked to date. The remaining large publishers, and indeed the mediums and the smalls will have to finalize a sophisticated mobile strategy in order to compete as well. The point solutions who have entered the market will have to seek out scale. And they look across that yawning chasm to those that have made the move to mobile and are beginning to ramp (some thirty mobile ad networks, and about thirty of the largest publishers by my count) and they are thinking oh shit, if this trend continues I’m gonna get killed on this side of the divide.

It looks to me like there is only one bridge, and people are going to want to cross it sooner than later. Even a one-hand driving, seatbelt-scoffing, scotch-in-hand Don Draper would see that signpost up ahead.

Note: I founded, with Krish and Dan, and financed Mojiva, owner of the Mocean Mobile Ad Serving Platform. That is the bridge, IMHO.

Fred w phone. No unlimited data plan just yet...

There is a yawning gap emerging in the world and I think this gap will define the advancement of societies, the creation of jobs,  and even the happiness of populations in the decades to come: it is access to mobile data and I call it Flintstones vs. Jetsons. (shout out to April Rudin for the headline).

• Generation segue: Some of us remember Fred Flintstone. Worked in a quarry, drove a foot pedal car. Loved to bowl and eat steaks. Life was simple, and there was not a lot of reason to innovate. Pebbles and BamBam didn’t seem to be a big generational culture gap. A loveable guy in the Jackie Gleason vein.
• And his cartoon counterpart, George Jetson. Worked are Spacely, drove an automated space scooter. Astro walked himself, Rosie the Robot did the chores. Skyped with the office, used the tele-puter on his wrist. Loveable knucklehead is in a fast-moving world, but he kept adapting and he kept pace.

So my point, my belief, is that we have arrived at a crucial inflection point in our history, where people, countries, leaders (and entire industries) are choosing to go Flintsone or Jetson. And the catalyst for this decision is, clearly, the smart phone and the data it generates. The Flintstone are content with how things are. They have found ways to live until now without technology, and they resolved they would coast from here on in, whether in their carreers or their lives. Financial planners are on the list. So is much of the financial services (non retail) industry. Traditional media has hated the transition. KONY is no fan. Nor is Assad, or Mubarak. People of a certain age (but not all!). There are lots more.

Meanwhile, the Jetsons accelerate. The gap has not even yet begun to present itself.

mOcean at Mobile World Congress

If you have any doubt of how quickly this industry has grown, check out the Mojiva/Mocean (I am an investor) booth at The Mobile World Congress. MWC was, five years ago, just a bunch of suits from Nordic and Asian countries wielding flip phones for voice and text. Today, MWC is heralded as the biggest and the best mobile technology event in the world. According to conference organizer the GSMA, this year’s event played host to a record number of attendees, topping out at 67,000 visitors from 205 countries; an 11% increase over the 2011 show. The four-day conference and exhibition attracted mobile operators, software companies, equipment providers, Internet companies and media and entertainment organizations, as well as government delegations from across the globe. More than 50 percent of this year’s attendees hold C-level positions, including more than 3,500 CEOs.

Most telling perhaps, CEO’s were wearing jeans, T’s and blazers…

So here’s the shocker datapoint from cisco: 40% of the worlds smartphone data is consumed by… 1% of the world population. That means a small group of people are gaining an unfair (perhaps) advantage because of their access to information

• The subways are down: take the bus.
• This new place is overcrowded: here’s another local option.
• Gas prices are skyrocketing, but discounted in NJ this weekend.
• This client has spent xxx seconds on the site and is ready to take the next buying step
• Yo Twitter! The rally to unseat the government has been moved to the following sidestreet!

The examples go on and on. A few minutes saved. A better solution for the moment. A bit more background before the interview. A better way, on the way. Compound that millions of times over billions of people and guess what: you have a new gap between the haves and the have-nots. Food for thought before you make your choice between Flintstone or Jetson!

Shields up!

This excerpt is serialized from a whitepaper titled Angel Investing for Single Family Offices (SFO’s) by The Family Office Association and Vaux les Ventures. For a complete copy, visit the FOA website.

I am often asked how I have dealt with risk as an entrepreneur and now more often as an angel investor. Short answer is I have just become accustomed to it, and at least always know when it’s there. Here are a few risks that both angels and entrepreneurs should consider:

Structural Risk must also be considered before making angel-type investments. While there are several angels who’ve become well known with their “spray and pray” philosophy, diversity won’t save an investor if the structure of the investments isn’t optimized. Unless the criteria are to be entirely passive and devoid of value-add to the company, then an SFO might consider putting some basic protective structures in place. These can be as simple as board and information rights for the SFO or one of its angel partners; basic protective provisions in the stock purchase agreement or reasonable valuations that still leave room in the cap table for another, larger investor later on.

Super-long hold periods are a recent – and generally unwelcome — development in the angel market. These are primarily a result of the moribund IPO market in the tech market over the last few years, as well as VC’s managing billions of dollars in committed funds. As a result, most companies are being forced into “hold” periods that can last 7-10 years — without liquidity. The VC’s have a vested interest in funding the company for a bigger exit (as they’re paid in part based on the amount of funds they manage). Entrepreneurs and angels are on the other side of this argument, as many have committed their lives, livelihood, and capital, and continue to risk significant portions of their net worth (in the entrepreneur’s case) and investable assets for the sector (for the angels) over an entire decade of risk exposure. The pressure has begun to release in the form of secondary funds like Second Market and Millennium Technology ventures, which purchase founder and angel shares far before the respective VC would consider doing so.

There are so many risks to being a start up, and those risks can be compounded (and/or mitigated) through how you go about angel investing.

Best rule of all: go in with eyes open!