Earlier today, I read and shared a post which recounted the recent seeding of the, so called, drachma startup (congrats on this) and expressed, in the form of a wish, the following thought:

We need a paypal mafia of sorts. There’s enough old money in Greece to put this together, but it’s mostly in shipping and trading businesses, so it’s not connected to the tech scene in meaningful ways. This connection must be made and nurtured. I don’t know how this problem will be solved, I am not the right person to solve it. But here it is, laid out for the more creative minds out there to ponder.

At first, the thought seemed right to me but, pondering on the subject a bit longer, I finally  came to a different conclusion. History  and experience elsewhere (not only Silicon Valley but even in our continent) teaches us that it is the entrepreneurs themselves that become angels and VCs. And not any kind of entrepreneurs but the ones that have, broadly speaking, worked in the same areas and the same fields as the those they later opt to fund.

I don’t think we will see money from shipping flowing in internet startup investments in Greece anytime soon. And if we do, the expectations will most probably be wrong and the management of the investments not appropriate.

There is nothing wrong with the shipping people. They are not morons of some sort that miss to see the ‘lucrative’ opportunities of the Greek startups. On the contrary. They are extremely cunning and capable businessman, used in dealing with bigger and harder issues.  But they happen to have have shaped their mindset, practices and goal setting in an entirely different sector. And this makes all the difference.

Tech startups and internet startups are not traditional investments that can easily fit to appraisal models and have clear cycles and signs of rise or fall. A startup is not a vessel. Its business model is, in most cases, unknown. Or, changing too often. It is unlikely that, if it doesn’t proceed according to plan, it can be sold as scrap. The money that a ship owner can put into startups is money wasted for him as there is no shortage of investment opportunities in his sector with more foreseeable returns.

In my career I have experienced something like this twice. Not from ship owners but from bankers. Once as a simple employee, in the beginning of my carier, and the other as the executive who was supposed to run the ‘investment’.
In both cases the investor was a banking institution and the investment an IT company.

If there is one thing I can immediately pin point as the reason of failure (as they both were failures) it is this: the banking people thought of these companies (:their investments)  as mature businesses and tried  to manage them accordingly. Actually, for a long time,  I thought the same way. It was only after a lot of effort and pain that I realized that my role was not to run the business (as per my job description) but to find the business I was assigned to run. Unfortunately, Steve Blank had not come up yet with the The Four Steps to the Epiphany and he did not save me valuable time.

If there ever is going to be a crowd of angel investors from Greece, for Greece and in Greece, it must arise from the Greek startups and their successes. Which means it is going to take some time. It will not appear before we see some substantial exits and some real wealth  transfered to founders’ pockets. Once we have them both, then there will be angels.

11 thoughts on “In search of angels

  1. Niko, thanks for this post of yours, it’s a really thoughtful one. I’ve experienced many of what you’re describing here, admittedly under a much shorter time period, yet with equally painful results.

    It is more than clear that the promise of sufficiently wealthy Greeks individuals and institutions supporting and investing in technology startups has fallen short. I agree it’s a problem of understanding and wrong expectations, but I also tend to see some light at the end of the tunnel, and I believe that time required to reach this is shorter than a full generation of tech entrepreneurs ‘retiring’ as angels.

    It does not make sense for an entrepreneur to allocate most of her time discovering and nurturing potential investors who have no idea of what she’s pitching about. Similarly, it does not make sense for an individual with, say, a net value in the range of millions and no relation whatsoever with the technology sector to educate himself, discover deals and put a significant part of her time to invest <5% of her assets for ambiguous results.

    It ends up, someone needs to serve as the missing part between them, doing the dirty job for both sides. Some sophistication does not hurt either, a portfolio of investments (see: a fund vehicle) might be more appealing than one long angel shot or two.

    I'm definitely biased since this is my way of making a living in the last three years and hopefully in the foreseeable future as well, but what I can share is that there is some investment appetite in the very background and if you treat it well, invest in reputation rather than expectations and create some good returns for a few insiders to become your trojan horses, things might end up to work out sooner rather than later. One or two success stories won't hurt either. 🙂

  2. George, thanks for taking the discussion one step further. You are right in saying that a fund can play the middle man. And Openfund has pioneered this role in Greece.
    And it surely is easier for a wealthy person to trust some of his money in a fund than in a single unknown and obscure startup.

    But the issue is a bit different and I want to remind you of a concern of mine that we have often discussed in the past: from the funding ‘ladder’ that we’ve seen working elsewhere, that is, seed funding, angel funding and VC funding, we (Greece) have made progress in the seeding, that’s undeniable. We have also seen some angel activity too, very little indeed. But we have no VCs yet.
    We need the whole ‘ladder’ to have a budding ecosystem of startup formation, innovation and, ultimately, success.
    I think now we are in the phase where angel investing is becoming increasingly a need, as various startups that have had a seed round or bootstrapped, are seeking to expand. Now, I know that Openfund is not playing purely the small seeder role and that it is trying to fill some of the gap the missing angels are leaving, yet, in the long run, this has to be sorted out both for the sake of clarity to the entrepreneurs as well as for purely financial reasons.

  3. I think George is right.

    The investing community in Greece is today where the innovation community was some years ago. Remember when we started opencoffee? At the time, many individuals (programmers, designers, students, etc.) who could be possible innovators, did not even consider starting their own thing. They didn’t know how to become entrepreneurs, or why. The same thing applies today to wealthy Greeks. Many of them have the potential to become angel investors, but they don’t know how, or why.

    How do we reach them? How do we get them to participate in the tech start-up scene? Who do we instill in them the angel investor spirit?

    Hm.. I may have an idea, I’ll have to work on it.

  4. Panos, investing in startups is a different beast. If one thinks of it having the mindset of just-another-investment, one is heading towards a BIG disappointment. George is right that it is more probable for a wealthy person to put some money in a fund than to go outright investing himself in startups. But this is not the issue: angel investing in not only about money. It is about being able to distinguish opportunity and helping out. It is a bit misguiding to use the word ‘investing’ for angel investing. It is rather assisting than investing. And this is why it is difficult from someone to be talked in, if he is an outsider.

  5. Niko, I agree. But you could say exactly the same for individual entrepreneurs: starting up your own company is a totally different beast than being employed. Yet, we are at a point that a start-up culture has been cultivated in Greece, and some people know exactly what to expect when the leave their jobs to start their own thing.

    I’m not talking about convincing “outsiders” to play the role of the angel investors, but to bringing them “in”. What I’m saying is that we could also cultivate an angel investor culture, in a similar way we cultivated a start-up culture.

  6. There is money and there is smart money. Guess who wins?

    Two years ago I was employed in a startup that was backed by one of these “wealthy” greeks. The understanding of the business even corporate governance was bottom low. The traditional investor could not see how a tech co-founder could get more than 5%.

    You should better stay away from this type of investors and go bootstrap. If you handshake then count your fingers.

    Having raised money from experienced entrepreneurs gives a TON of difference to your business and I guess if I had raised from more well-connected investors things would be even better.

    TL;DR Raise money from people who have been in your shoes.

  7. Panos, we are in line. I have some objections about the bootstrapping advise though. Not that it is inherently bad. But it not always feasible. I will save this for another post though.

  8. Bootstrapping is definitely hard, but it is a better way than the “dump money” investor. I’ve tried as well to seek funds from such guys and we got nothing besides huge egos and superiority mindset. I can’t imagine a way that a deal like that would work.

    If those people could trust their money to a VC or a firm like OpenFund that would be ok, but having them in startups would be a disaster.

    Having OpenFund and a couple of angels is probably enough for the time, as the rest of the ladder is nearby in Europe, where we should anyway have to be connected if we want to establish real tech businesses in our country.

    Vrypan’s idea sounds cool, but I don’t think can be applied in reality. There is no other way to understand entrepreneurs than being one. Entrepreneurs need investors as team members. Besides their money they MUST bring in something else (contacts, skills, experience, etc.)

    Just my 0.02, nikan thanks for the inspiration 🙂

  9. Angel investors do not invest!

    Angels love to get involved into startups if they foresee a future, if they assume that the game will be fun, if they smell action, if they want to bet.

    Investing money as an angel is actually buring money.

    No logical man expects big results while deciding to get involved into a start up.

    It is all done for the shake of the rushing blood though the journey which is the actual reward.

    Playing money in casinos, actually leaves a bigger profit.

    But, profit is not what an angel investor targets. Angels love to get involved, share their experience, build human relationnships, educate, use their rotten toolboxes, reignite old sparks, show off their skills, fail fast, learn, reunite, win.

    It is more of a battle than just an investment.

    To be an angel, you have to focus on your instincts but not on any financial forecasts which are more of bad written scifi plots than actual roi calculations.

    Burning money as an angel is more of a game than a placement; and indeed it is risky as hell.

    But risk pays! If you take the right guess, you can end up with some good pocket money or maybe break even your losses from your previous games.

    Anyone who wants fun can be an angel investor, even ship owners!

    Put it this way, a ship is safe at the harbor but ships are not made for this. Same as startups… They are safe all during the pitching process, safe on the hard drives or clouds but are not meant to be just that!

    You need to go out there and do it, and angels act like the good captains.

    They have sailed rough seas, they have faced disasters, they have lost resources but above all they stayed alive so they can be behind another wheel.

    Sure the Greek angel community does not exist; but who needs one? And why?

    Startups need to focus on their ideas and sure monies will come. There are already a few that made it. None made it because they got their pitched bargained in front of an angels crowd. They made it because they were capable to.

    Guys, it is tough times for Greece. Worse weather is on its way.

    The crazy ones the misfits are always there! Expect them when the tides are high; do not try to convince them, just inspire them.

    They will buy the ticket and you will enjoy the ride.

    Nice post Nikos!

  10. And yet, the closest thing to a “recipe for success” seems to be that you only have to push forward. Even if you can’t define towards where ‘forward’ is. Don’t worry too much about finding the money, although you should be looking for it anyway. Sounds more like a religion than science, isn’t it?

    The thing is that it’s fun 🙂

    I like the momentum that is building up in Athens and Salonika, mainly around gatherings like OCs. I think we are indeed moving “forward”. Let’s keep it fun and hope we don’t attract much of the low-life that is known to populate the Greek “business” gamut.

    @kkoolook’s right on the “money” (pun intended). Hope to encounter some of those in-for-the-ride Angels 😉

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