Friday, June 4, 2010

How to P... off an angel

I considered holding this post off.  Then I realized that my raw response to the circumstance that originated it may be a useful component of the lesson.

Last week I met a college student intent in starting a new business and looking for help financing and marketing his venture. Admittedly I am a deal junky and cannot resist helping a startup along; here is the result.

Anatomy of a (lost?) deal
The young man I first met (P1) seemed quick thinking (+), amiable (+), articulate (+) and entrepreneurially flexible and opportunistic (+)
At our first meeting he gave me no means to contact him (-) but he followed up and contacted me (+) [if you want to appear like you can play, at least get some $5-precut-forms-inkjet-home-printed business card]
The business idea may have legs (+)
I have a lead into a potential customer and stated so (+)
The prospect, on my recommendation, may be willing to pay for a pilot test (+)
I asked for a follow up meeting specifying what  I needed for my due diligence before pitching their deal to my prospect.  To T-up the meeting I emailed that: i) I'd be willing to sign an NDA, ii) I need to know material costs to figure the financial commitment required to do a pilot (particularly if I and friends are to be angels), iii) I need to satisfy myself that there is a really working system capable of doing what is proposed, before I go put my good name on the line.
The meeting was scheduled but no information requested was sent ahead of time (-)
At the meeting I met Partner #2 (P2)
P2 from the outset displayed a surly and arrogant attitude apparently intent to require my demonstration of why I should be granted an audience (-)
P2 barely introduced himself [another one with no business cards] and gave no additional details about himself or his experience (-)
P2 pointedly asked whether I had a resume to demonstrate I deserved any attention (-)
P2 shoved in front of me an NDA of 4 pages (filled by hand with the company name), folded open to the signature page requesting I sign (apparently without reading it) before we continued (-)
After a few years experience with hyper-self-important student entrepreneurs, this was not a total surprise. Rewind to 1973 and probably there go I. I declined signing an NDA I could not review for lack of time. I proposed to limit the conversation to information not requiring NDA.
As expected, I got none of the information I sought (-)
P1 tried to mend fences offering whatever information he could without agitating P2 (+)
P2 spoke in roundabout ways of their IP, yet unfiled, unsearched, unsubstantiated (-)
At first sight P2 has little sense that his "idea" is unlikely to be defensible from competition (-), particularly because all components of hardware and software are readily commercially available (-) and the idea was already published by many including Steve Wosniak five or six years ago (-)
Speed to market is their ace, P1 gets it (+) P2 doesn't (-)

The odds that I will find the time and motivation to try again have dropped by 90% (-)

Lesson to be  learned
Angels invest in people first.
Beware the partners you have and display in public.  In a single session they can trash whatever you had carefully T'd-up.  For student entrepreneurs there will be many more chances. Later in the career path you may be betting the house on a losing hand.

Marco Messina

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