December 6, 2007

Are you a bank or an investor?

We had a fantastic webinar this morning on “Angel Investments and Term Sheets.”  During the presentation, the attorney (Karl Israelsen from Stoel Rives) talked about “traditional” deals and terms that are coming across his desk.  Part of the discussion was about terms that could possibly be included in a debt or convertible debt deal.

One thing that the attorney cautioned entrepreneurs on was taking terms with a personal guarantee.  By definition, the term investor means that you will be taking up some risk.  When an investor includes personal guarantees with other traditional terms (security agreement on company assets, convertible option, higher interest rate, etc.), that investor is then acting more like a bank or a financial institution and not an investor.

This topic usually stirs up quite the discussion — especially with those “investors” that like to include personal guarantees.  What do you think about the subject?  Should investors feel ok about attaching personal guarantees on the deal to reduce their risk?

Al Horford and the Rookie Entrepreneur

A quick thought before I run off to the Home Runs in IT conference in Provo …

David Thorpe gave a video breakdown of rookie Al Horford on The Worldwide Leader’s website, and it taught me something about entrepreneurship.

In the second clip of the video, Horford is given the ball on the top of the key with a defender half-way down his throat.  Thorpe points out that most rookies have a tendency to react hastily in situations like these, instead of reading the situation and making the right choice.  He says,

Reacting instead of reading is a recipe for trouble.  Most rookies, and some veterans, would have rushed into a mistake in this situation.  But Al Horford stays patient and ends up with a wide open look.  His follow through is perfect, too.” 

Entrepreneurship requires quick thinkers who can quickly identify an opportunity and take advantage of it.  Fortunately, most of us entrepreneurs are not short on these qualities.  In fact, I’d say that most of us are idea generating fools.  Just let us walk through town for a couple of minutes, and we’ll see 20 business ideas!

Unfortunately, we don’t always take the time to read situations before we react.  And when we do react, our follow-through can be a little less than Al Horford perfect.

This week, take the Al Horford approach to entrepreneurship.  The next time you are given the opportunity to partner with a company, hire someone that looks like a slam dunk, engage a service provider, or whatever else comes up, take some real time to read the situation before you react.  Think long-term.  Think short-term.  Think mid-term.  Think about how it will affect your team, your revenues, your customers …

Then, when you have made your decision, follow through thoroughly.  Young, bootstrapping companies don’t have very many opportunities to make mistakes before they die, so make every opportunity count.

Have you seen an entrepreneur with great vision and follow through?  Tell us about him/her?

Have you ever reacted too quickly to an opportunity that you have later regretted taking?  Tell us about it.