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iHub By Joseph / April 17, 2014

Angel Investors: The Good, the Bad and the Ugly

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Guest Post By Alex Muriu

I was seventeen going on eighteen when I started my first company; a modest, little cloud services venture that I dreamt of growing into an Enterprise in the near future. This bold step was thanks to the impetus I got from one Mr. Mwangi, a buoyant fellow with a blessed mid-section and every other characteristic that signals success. I had interned at his company during my pre-university period and he more than ardently told me that Universities were nothing more than a beard growing affair.

He of course had gotten a degree at a local university, and upon questioning him on this he would retort that he should have known better. Either way, he ran a successful BPO company and rented out office space to small businesses. To help me get started, he offered me free office space, free internet access and a thick card holder made up of contacts he had accumulated over the years. I had three months to make something out of it, and he would start charging me a fee thereafter.

I consider him my first ever Angel.

The Good

Mr. Mwangi would pass by my office every morning to find out how many contacts I had called and what the outcome had been. He would be sure to offer a tip or two before rustling off to release the night shift team at the BPO. He would randomly invite me to his office whenever any of his peers paid him a visit and introduce me and my services. It would be up to me to follow up.

Three months later I had a modest number of clients signed up and even managed to hire an office assistant to help with closing more business and managing projects. One day he passed by my office and found me out for the day. My assistant on the other hand was available but had the misfortune of being on Facebook when he appeared. He fired her on the spot despite not being an executive director in my company!

Mr. Mwangi never offered me a cent in capital input, and prevailed upon me to never consider taking money for anything other than my services.

A year down the line, I was making decent money, paying my way through college and helping my parents out financially. Not to mention ‘balling’ whenever the right opportunity presented itself. I was happy.

In retrospect, I could have leveraged his offshore contacts through his BPO and generate massive amounts of business from the US, where companies were looking to Africa for more cost effective remote expertise.

The Bad

Soon as I felt that my business was in need of more brains, I started looking around for more Angels who could add value to the company. I was quite generous; willing to give 50% of a company I had ran for three years to the right Business partner.

I settled for a friend who had all the right ‘connections’ and was capable of bringing on board big fish clients to the company. After three years of dealing with startups and SMEs, I was ready for the big leagues. Without much ado, I gave up half my shareholding.

We shall call her M after the James Bond films character.

M had a lot of ideas on how we could transform the company, and I appreciated that she treated me like an equal, unlike Mr. Mwangi who always carried a condescending air with him. She brought on board a project management process, created SOPs, rebranded the company and of course got us through the doors of some very important people. We were about to soar; or so I believed.

M believed the right number of directors to have in a company was three. Her wisdom was that in cases where there were differences of opinion, it helped to have an extra party to break the tie. It made sense. This would mean diluting our shares to accommodate this extra party. Once again, I happily reduced my shares to 33.33% to have a third equal partner. Better 33% of a 100M company than 100% of a 1M company right? To date I still can’t for the life of me figure what logic we used to bring him on board as an equal partner.

This one is a long story, but here is the gist of it. We ended up with three equal partners, all as it turned out, with very strong differing views of where the company should head. The outcome? A company that started dying from the inside.

By the time I realized the screw up on my part, I had lost two years, lost all company money through financial mismanagement and had some very ugly fights with my Partners.

Mr Mwangi has never quite forgiven me for it.

The Ugly

I guess you are wondering if it gets any worse than that. I previously wrote an article in this blog on lessons I had learnt from running four startups. Be sure to check it out.

With every startup, I learned many lessons. What I appreciate about them was that, despite how painful some were, they helped me grow both as a human being and a businessman.

The Ugliest of them all is still a fresh wound so I will hold on to it for now.

I hope you have picked up a hint or two on how to deal with Angels.

About Muriu (@hellomuriu)

Alex Muriu is a Digital Marketing Professional, Blogger and Tech Entrepreneur based in Nairobi, Kenya. Follow his thoughts at http://muriu.me.

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Author : Joseph

A USIU trained journalist & an aspiring animator Joseph thrives behind the camera. He is a still photography and videography aficionado. Joe is currently the director/editor behind African Tech Bits, an iHub production that features start ups in the tech scene. This Canonite can mostly be seen at the iHub in the company of his Canon 550D.


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