I’ve written about this before (see “Beware of ‘Angels’ with Sticky Fingers“) but I just had a fresh run-in with this class of investor and wanted to share the (anonymized) story in case others find themselves in a similar situation.
The new twist on the story looks like this:
- An “influential” angel writes a small check in a new company’s seed round
- Like any good investor, that angel does what he or she can to help the business succeed — making intros, giving advice and generally being supportive of the founders as they do the incredibly hard work of building a business from scratch
- Now it’s fundraising time, and this angel — like all the other early investors — helps out with intros to potential investors
- As new investors begin to lean in, this early investor makes a private demand to the CEO for a substantial equity grant (one or more full points pre-financing) for their “invaluable assistance”
- The punchline to this demand is a not-so-veiled threat to stop doing what every other investor has been doing as a matter of course to support their investment — putting their time, relationships and reputation behind the business they invested in — if this demand isn’t met.