The US is home to well over 360,000 angels. These active, accredited investors put billions of dollars into young founders and can often be an important step for fueling an idea into a venture-backable business.
One of the most well-known angels, David Rose, helped put New York City (aka “Silicon Alley”) on the map as one of the main startup hubs on the East Coast. From real estate tech to wireless technology, Rose wore many different hats throughout his professional career before moving over to the investing side of the table.
He wrote the book (multiple, actually) on angel investing and founded the New York Angels investing group.
Most recently, Rose has doubled down on his efforts to grow the startup ecosystem. He is Founder and Executive Chairman of Gust, a popular “company-as-a-service” platform that helps entrepreneurs start, run, and streamline their fundraising efforts.
He’s been called “New York’s Archangel,” “The father of angel investing in New York,” and the “Patriarch of Silicon Alley” in the press.
But this last Tuesday, Rose left New York for the day to hang out with Atlanta founders. He flew down for a few hours to take part in a fireside chat at Kabila’s Tech Tuesday Happy Hour, which took place in Buckhead at Atlanta Tech Village. During his time at Atlanta Tech Village, the entrepreneur and angel investor answered some of the burning questions founders had about setting up their early-stage companies. He talked through decisions around using an LLCs versus C Corps, who should be on a Board of Directors, and what red flags angel investors look out for.
One big question addressed in the room: How in the world should you go about splitting co-founder equity?
His answer: Don’t split equity equally between co-founders. If you do, you’ll eventually get to a point where a disagreement can’t get resolved and your company will end up without a reasonable path forward.
Don’t think of equity as a “reward for just being there,” a “payment for past services” or something given “in lieu of a salary.” Equity should be an incentive for those leaders currently at the company, he added.
He suggested that founders check out Gust’s co-founder equity calculator, a free tool that helps co-founders align on what a fair equity split looks like.
What were our other big takeaways from Rose’s time in Atlanta?
* “Shark Tank is to angel investing what Indiana Jones is to archeology.” Don’t waste time pitching angels with some flashy story like you see on business shows. Angels care about two big things: Scalability and risk. Focus on showing how much you’ve de-risked your idea.
* If you plan on raising money down the road, become a Delaware C-Corp from the very beginning. Things get tricky if you try to switch from an LLC down the road after you’ve brought on investors.
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