Will you be my angel? 😇

Yes, today we start with a cake photo. It’s my birthday, so I thought that a little poetic license in this issue would be appropriate. 🎉

I couldn’t be happier and more humbled to have you reading this.

My goal with Open Books is to share my experience in finance to make your business life easier. No bullshit. No non-sense. Just the opinion of someone that is trying to fit into this world surrounded by auditors, investors, lawyers, tax authorities, and accountants.

My perfect birthday gift would be to get each one of you to get a friend that you think would benefit from my articles to subscribe to. That would make my day even more special!

Enough about me. To the article:

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Today I would like to talk about a segment of fundraising that I have been each time more interested in: Angels.

What I like the most about working with angel investors is that they are usually entrepreneurs themselves. They not only understand better what you are going through but they have also been there, so it's more likely that they know what are the aspects that they can be most helpful with. From offering intros with specific sales partners and distribution channels to help you hire the best talents out there, angels will do all they can since they are as incentivized to get your business growing as you are.

On the other hand, getting the rights angels to invest in your business is a lot of work. If getting intros for VCs is already a pain (and they do investments in startups for a living!), imagine how hard it is to build a connection with someone that amongst many other things, also does angel investments. Further to that, the amount they invest (from US$10,000 to US$200,000) is much lower than institutional investors, which makes this segment of investment quite hard to scale.

And there are a few opportunistic so-called 'angel' investors that are actually the loan sharks of the 21st century. They require a big chunk (sometimes even >50%!) of ownership to compensate for the risk they are taking. This couldn't be a more stupid strategy since the best way for angel investors to make money is by selling their stake to a larger investor or an exit event (IPO, sale to a strategic investor). No investor will want to invest in a company that has 50% of the ownership compromised with an angel investor, which means that both you and the angel investor would be in a bad position.

Syndicates of angel investors are becoming more popular too. Individuals join forces with other angel investors and gain synergies on the deal sourcing (looking for startups to invest in), due diligence, and deal structuring by the lead angel (Jason Calcanis and Naval Ravikant run probably the most well know angel syndicates). This is interesting since you get visibility more efficiently instead of going from angel to angel, you get access to a pool of angels. Ticket sizes are usually bigger as well, so it's a double win in terms of fundraising efficiency.

Overall, I believe having some external capital in your company is quite often positive. If this capital comes with professionalism, network, and insights to your business, even better. That is what you should always aim for.

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🎧 Podcast recommendations

▶️ My First Million: Why You Should Take a Think Week Like Bill Gates: I’ve been listening to MFM for a while now. Shaan Puri and Sam Paar are two entrepreneurs that discuss ideas and news in the startup world, crypto, and a lot of fun topics. I like how authentic they are. This is a good episode in which they discuss, among other things, the importance of taking a week off to dedicate to full immersion in a topic. In Shaan’s case, it was crypto and NFTs. Sounds fun.

▶️ James Altucher Show - How to be "Smarter"?: James Altucher is a genius. He has been broke twice, has a career with so many different endeavors, and is very candid about life and business. In this podcast, he discusses strategies of how to be smarter, to think, and to rationalize faster - no memory games, nothing related to gathering more information, just being sharper. Worth a listen!

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This is Open Books - a weekly newsletter carefully curated by me, Leticia Souza. Every week I’ll be compiling relevant topics around finance and financial strategy - from choosing your first accounting system to how to successfully close a fundraising round to your business.

In a world full of noise, I’m hoping to bring clarity and direction to your finance processes so you can manage your business in peace. If you find the content useful, do your friends a favor, and please share this newsletter with them.

See you all next week 👋🏼

Leticia