Capital comes at the cost of ownership and control: Elizabeth Crowell

Elizabeth Crowell is an angel investor and entrepreneur living in Brooklyn. She started a boutique shop with her husband, Sterling Place, and weathered the great recession. She became a fellow in the Pipeline Fund in 2011 and has since been making angel investments in early stage ventures. She has a strong interest in women, underrepresented groups and truly small businesses.

She spoke at the eLuminate Network‘s half-day conference in Manhattan, “Getting Investors Wallets Out of Their Pockets.” Here are some takeaways from what she had to say:

• Crowell was there in the first dot com bubble. In the late 90s, she was working to convince music execs that there was a great future in digital. That did not go well, but she learned a lot.
• Capital comes at a cost: ownership and control. Don’t raise money if you don’t really need to.
• It’s important for founders to define success. Is it a giant exit and millions of dollars? Her family is able to take 12 weeks off per year. She calls that success.
• Angels are investors that are going to want to be involved in your business. You aren’t just getting money. You are getting a person (or people). Make sure they are someone you want involved in your company.
• 80-100 hours of due diligence is a good guideline on the angel side. Startups should expect that to eat up a lot of their time, too.
• “Valuation is a negotiation.” That final talk about how much of the company an angel’s dollars buy is a conversation, not a ready-made math equation.
• You don’t have to sell equity when raising money. Convertible notes are also a growing class of investment. To oversimplify it: it’s debt that isn’t due for a while, accrues interest and converts to equity if a certain amount of the company is sold (every part of this varies by the instrument, but that’s the basic idea).
• Another option is selling an investor royalties.
• Set up clear guidelines of how you are going to communicate with an investor once a deal is done, and do it, consistently.
• Crowell always tells founders who pitch her, ‘Tell me about your accountant and tell me about your lawyer.’ It’s about the details, understanding a team and being prepared.

Crowell and other participants through the day spoke a lot about founders who were under-prepared in pitches or didn’t have realistic assumptions (such as revenue estimates). She and other investors and entrepreneurs at the event strongly encouraged entrepreneurs to draw on each other to prepare as much as possible.