Do you Angel invest? If you do, you know it involves writing a check. One that you might not ever see come back. Or one that may be fruitful and multiply, and come back in expanded form to you later.
In actual operation, it’s not quite this simple. It’s a variety of checks. At least that’s how I traditionally do it. While there might be an initial targeted infusion of cash, say to hire a marketing person or developer for a timeframe of six months, there are also a series of underwritings happening here and there. Securing domain names and search terms. Paying a PR consultant’s or a patent lawyer’s usually discounted retainer fee. Securing a booth at a campus hiring event or tradeshow. Even buying a few pizzas to celebrate the achievement of a small milestone.
This amounts to lots of smaller checks. For what the company has to spend on to get to the stage where they can present to larger investors at the venture level as a legitimate business, earning and learning, acquiring customers, and experiencing momentum and fame.
All those little checks help to get them to that point. To allow them to spend what they need to get there – and get there with timeliness and momentum they may not otherwise have had.
Assume that the company goes on to secure larger investment, and goes on to be wildly successful.
Were my checks used to spend? Or did I invest?
Clearly it was both.
I prefer the word investment. Money put into a startup effort always is. Investment is money placed with a goal and hope, with expectation and urgent insistence. What we call it places it in that context and assigns the rules and framework of the plans we accord to it.
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And on that private sector, innovative, entrepreneurial note? Let’s look at President Obama’s State of the Union message1, and its use of the word “investment.”
How many times did he employ the term? The exact number doesn’t matter. What matters is the theme: We need to put something in now to get back more of what we want in the future. It has to happen in a reasonable amount of time, with a reasonable and positive return.
Obama added his signature tone of hope and inspiration to the mission-driven message that those in startups know all too well. He even added a bit of alluring challenge, to larger industries like oil, choosing to give favor to those still sitting with promise on the sidelines, such as clean energy. Industries of happy tomorrows and open, eager hiring structure. Things you invest in, and take a chance on, that become very big soon enough.
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Though President Obama did not go into this in detail in his speech, the unemployment situation that permeates most political speeches nowadays has differences from previous eras and iterations. It is clearly structural8, the product of eliminated, technologized or overseas-shipped roles in various geographies. All translate into greater productivity and profits for specific corporate entities, yet fewer and differently distributed wage opportunities at the mid to lower levels. None of these outcomes are good or bad in themselves. All are in the natural progress of business, and the business of progress.
Obama talked about ‘investment’ because in such a situation, normal cyclical remedies like tax cuts and benefit extensions may sound good, but are less effective and timely. They also may involve more government resources.
In many industry cases, this is no revival, per se. This is a re-creation. A rebuild. The tools need to change for that to happen.
We need to get people to invest in new businesses and industries. To fear less, hope more, inspire and be inspired. You know the words to this song.
That song happens at all levels. Individuals and government, each of us as a citizen having preferences as to the degree and manner of each.
President Obama was saying (I paraphrase here) “we’re doing it. We’ll get it started and give you that first shove. We’re the seed stage angels. We’ll invest. Then you all – you who aren’t government? You gotta pick it up.”
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Congressman Paul Ryan’s Republican response just following mentioned, in one line that I found disjointed from his appropriate message of awareness of the perils of debt and deficit, that Obama had tried to categorize “spending” as “investment”:
“Unfortunately, instead of restoring the fundamentals of economic growth, he engaged in a stimulus spending spree that not only failed to deliver on its promise to create jobs, but also plunged us even deeper into debt…All of this new government spending was sold as ‘investment. 2’”
Republican.Senate.gov3 followed with same, with a list of specific lines from the President’s speech, handed out in timely fashion to hungry and capable communications directors across Congress.
They criticized the categorization of spending-called-investment. They inferred that this was not a combined meaning, but an intentional deception. This was picked up immediately by several Members of Congress, both by rote and with flourish. Including, on both counts, Senator Pat Toomey of Pennsylvania, on MSNBC’s Morning Joe4.
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With respect to his extensive knowledge on the subject of all things money and investing, I furrowed my brow when Senator Toomey mentioned this.
I understand that it was the daily communications line, a la Deaver5 era, and his casual work-in of the point was skilled. I’m certain he was resoundingly praised for it.
But it contradicted much of what I consider to be his – and in fact his party’s - stronger message areas. Ironically it also rebelled a bit against what I observed from him on the campaign trail in terms of thematics and slogan.
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There were many dualities introduced – I grant, by both sides – in the 2010 Pennsylvania U.S. Senate election which pitted an uber intense, operationally gifted retired navy Admiral against a reticent, cleverly contemptuous investment banker. Who later ran a sports bar with a fryolator in the kitchen. Or didn’t.
Though Candidate Toomey in his own words did not ‘operate the fryolator’ (an elitist gaffe I found simultaneously darling and unbelievable6), he made clear he understood how a small business was built. This offered contrast to Admiral Sestak’s military and parental careers, both harshly selfless and authentic paths of valor and discipline. According to Toomey, and not incorrectly, entirely subsidized by taxpayer dollars.
This duality decision, made by both campaigns in tandem, branded the 2010 Pennsylvania Senate race as the land of ‘no nuance.’ I think that branding hurt both of them.
Having spent considerable time on the race7, that no nuance thing simply wasn’t the case.
Yes, the candidates were and are very different. But both were also intellectually different from the staid platforms of their respective parties. In thoughtful ways that deserved deeper attention.
Some of these ways had to do with views of investment decision. How it should be done.
Which, oddly enough, overlapped at times.
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Pennsylvania is a land of strong opinion and deeply felt belief, and an abundant number of starting and failing businesses of the small variety. The opinion mixes shift across the state as you drive west, and regularly defy traditional party lines
This means that elections In Pennsylvania get to be about turnout, fortune and genius. There are reliably red and blue places. Platform-based turnout can therefore account for 70% to 80% of results. But it’s rarely enough alone. The remaining segment7 is attained via the latter two. Via political wildcard.
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Toomey placed an investment hat on, in the context of being a successful moneyed man beyond error or care, in both the big world of banking and the smaller but locally significant world of sports bars.
Admiral Sestak had cornered the market on leadership, discipline, authenticity and operations knowledge, all associated in voter’s minds with his distinguished career in the military.
But Toomey had a wildcard to play.
The theme was that Sestak knew how to tax and spend but that Toomey knew how to invest.
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I watched it play out in the weeks and months following. Consider the thematics it carried.
Sestak knew how to come in and solve a problem. He was not afraid to employ public money wisely to solve it. He was appealing, most often, to those of charitable mind, and to those in some stage of struggle who needed a hand up to get back to self sufficiency.
Toomey was the investor and change guy who believed in -- self-belief. He was appealing, most often, to those just beginning a business effort or those who had well completed it. People for whom government seemed an irrelevant, burdensome player.
Yet both candidates were all about “investment.” Sestak sat in that middle part of investment, where you are working your tail off with sweat and doubt. Not knowing but still fighting. Needing a small check here and there to stay liquid. Toomey was at the idealistic beginning and the calm and plentiful conclusion of investment, at which time you don’t yet know or have long forgotten the idea of needing that angelic act.
Sestak had been, for more than three decades, converting the resources that went into the military into successful action.
Toomey, banking and derivatives history aside, chose to highlight his strategic role as an investor in a sports bar/foodservice business in which he did not operate equipment. He did the books. He hired and oversaw. And, grip something before you read this, he bought stuff. One of them was that famous fryolator.
These are all investment actions. They’re all good. Spending on – wait, I mean investing in - that fryolator undoubtedly allowed the business to earn more income. It wasn’t about tax cuts alone.
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Back to our Toomey wild card, which said investment and spending, good or bad, were two different things.
The duality wove into many issues, but came down to this. One guy wanted the government to seed your investments – and decide first. One guy wanted to give you a tax cut so you could do that yourself, albeit on a smaller and slower scale. Knowing a few of you might hit the big time. And a lot of you wouldn’t. Up to you to make it happen.
It was a close election. It could have gone either way.
Investment , a word without party affiliation, won.
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The recent history of government investment at the federal level offers cases of both success and dire inefficiency which I’ll pursue in several subsequent writings. As a person of entrepreneurial bent, I am in agreement with Senator Toomey that always going to the government ‘angel’ first isn’t morally or economically valid. The self-belief theme inherent in private sector innovation is quintessentially American and needs to be part of our dialogue.
Toomey brings some highly relevant experience to the Senate; however this experience will not come to good use if he harps upon false divisions between investment and spending. It’s a distractive and petty point and sullies meritorious suggestions he has or may make around enabling the private sector to assume functions which it could perform more effectively than would government.
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Without blessing all that Obama’s speech offered, one thing the President clearly understands is that there’s a piece of that “Investment” term in just about everything that might work right now as we address the need for new industries and new innovation sources as cures to structural unemployment.
The President also understands that the communication of the meaning of the word “investment” is essential.
Let’s place responsibility back on the people to innovate – and let them own that innovation. Put the government in a solid position to be its angel, as and if appropriate. But let those who want to do it alone? Let them do it alone with lessened burden.
If it’s viewed as ‘spending?’ It ends there. We spend, it’s gone. The business plan, the momentum, the pizzas - all the things angels like me know well, won’t aggregate or focus upon the results necessary to move to that next level.
The word investment changes the context, and pushes that success outcome. It was important that the President used it.
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The Republican Party, in countering this word’s use by their opposition, ironically works against its own independence and action-directed agenda, of which Senator Toomey and Congressman Ryan are intellectually gifted advocates.
It’s understandable that the Republican Party is frustrated that the Democrats are throwing about what they thought, at least for the last decade, was a Republican word.
But this isn’t Democratic deception. It’s acknowledgement.
Isn’t that a form of victory? If their shared agenda is to promote investment, then the use of the word and its implied priorities should be of paramount importance.
The question now? Is not should we invest – but who should wisely invest, when and how.
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(1) http://www.nytimes.com/2010/01/28/us/politics/28obama.text.html?_r=1&page...
(2) http://www.jsonline.com/news/statepolitics/114613784.html
(3) http://republican.senate.gov/public/index.cfm?FuseAction=Blogs.View&Blog_...
(4) http://www.youtube.com/watch?v=hTSX4EqVHxU
(5) http://en.wikipedia.org/wiki/Michael_Deaver
(6) http://articles.philly.com/2010-07-13/news/24969486_1_joe-sestak-national-debt-attacks/2
(7) The remaining segment referenced here was a key 2010 research focus of this writer, and a number of observations shared here were gathered during the writer’s own interviews with this segment between May and November 2010.
(8) http://www.investopedia.com/terms/s/structuralunemployment.asp