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Entrepreneurs, investors and a choir of angels

By Amy Rees Anderson

For the Deseret News

Published: Friday, Nov. 16 2012 8:00 a.m. MST

Amy Rees Anderson, CEO of Mediconnect Global photographed in her office at the company headquarters in South Jordan, Utah, Thursday, May 29, 2008. Ashley Lowery/Deseret News

Ashley Lowery, Deseret News

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Editor's note: This article written by Amy Rees Anderson originally appeared on Forbes.com and is being reprinted with her permission.

While I have been an entrepreneur for more than 20 years of my life, I have been an angel investor for less than one. As such, I have a pretty unique position of still being able to understand exactly how entrepreneurs feel, while now sitting on the other side of the table negotiating against them as the investor.

Filling this new role at this time in my career is somewhat comparable to being that 20- or 30-something young parent who is still cool enough to remember what it is like to be the teenager, but now has to play the role of the grown-up who sets and enforces rules. You feel a bit like a little kid in a grown-up’s life.

I can empathize completely with the angst these entrepreneurs are experiencing as they have put everything on the line and are just trying to make it. But at the same time, I know that, as an investor, I must play the part of setting expectations and enforcing fair valuations. I decided I would tap into my “still-cool-enough-to remember” side in this column and try to give the best advice I can to those entrepreneurs who are trying to win over an investor.

When you meet with an investor, you have to learn to be optimistic in a uniquely realistic kind of way. Realistic is painful for entrepreneurs because it feels like they are saying they don’t believe in themselves or their idea. They tend to be constantly in “everything-is-going-to-be awesome” mode, especially when they are presenting to a potential investor. Herein lies the problem: That investor is about to take their own hard-earned money and they are going to gamble that money on one thing and one thing only — trusting the entrepreneur.

Sure, the idea matters, as do market size, revenues and costs. But more important than any of those factors is the person in charge. A fantastic leader with a poor concept will somehow find a way to make that endeavor a success, but a poor leader with the best concept will almost always result in a failure. The investor is paying as much attention to the entrepreneur as an individual as they are to the idea; they are looking for an entrepreneur they can trust. Thus, the way the entrepreneur presents his or her idea will either inspire trust or destroy it.

Let’s put this into perspective with a familiar scenario: Imagine a teenager taking his parent’s car out for a drive by himself for the very first time. The teenager comes to parent and says, “I’ve got this. No problem. Don’t freak. It’s all going to be fine.” The parent’s first reaction is: “Oh my goodness, they are going to total my car and end up dead or in jail.”

Now let’s try a different approach. The teenager comes to the parent and says, “I want you to know that I realize that driving a car is a huge responsibility, and one that requires serious attention to my own driving as well as the driving of others around me. I know that despite my training, the fact is that there will be unforeseen circumstances that could arise during my trip. While I don’t expect anything bad to happen, I have thought through how I would handle any difficulties that could arise and have prepared myself with emergency supplies, flares and jumper cablesy. I also realize that you have a right to worry about me, and I will do what I can to communicate throughout the night so that you don’t have to wonder whether or not I am OK and on schedule to arrive home safely.”

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