Top 3 Reasons Angels & Entrepreneurs Walk Away from Deals

It is 11PM on a Friday night.  You just got off the phone with your lawyer and all the paperwork is in order.  The Board has given you 24 -72 hrs to pull the trigger.  You have spent last 3-6 months getting it to the finish line.  Yet come Monday the deal didn’t go through? Either the entrepreneur walked away or we did….

Does this happen frequently? I don’t know; but would say it is infrequent occurrence but heartbreaking when it happens at this late stage. The essential question is : Why? What Happened? What led to both sides devoting time/money/resources but were not able to close the deal? Of course, not all deals get unraveled last minute.  A few fall during enhanced due diligence.  Many fall away during the term sheet negotiations (majority).  But the ones which hurt the most (to the Angel/VC and to the Entrepreneur ) are the ones where only a signature is awaited for executions. The feeling when this happens is like being left alone at the altar – with the whole world watching. The single instance it happened to us – the Entrepreneur team decided to walk away as they wanted to keep exploring more lucrative terms.I wanted to share a few common attributes I came across as I analyzed BVG deals which didn’t get through. I have tried looking at this from different perspectives – the Angel/VC, the Entrepreneur/Founder and my own personal take.

1)     Lack of Transparency:

This is common occurrence  – we can share NDAs, etc., across the board but sometimes we don’t get critical/basic information revealed to us until diligence takes over. This holds true for both sides of the aisle.

The Angel Perspective: Too often we find that the Entrepreneurs are hesitant to share the details of their ‘secret sauce’ with us. This is typical during our enhanced due diligence where we are evaluating offerings especially in the Tech/financial services/clean energy sectors. Come on folks, we signed the NDAs, wouldn’t be talking the details with you unless we understood that your summary level offering had a good chance of making it in the market place – so yes we need to know in detail how that trade algorithm works, how that trough moves in the Solar Space, how secure is your secure chat offering? I don’t want to find elementary things during due diligence. It is a waste of our time and yours and calls into question your integrity? Guess what we are walking!

The Entrepreneur Perspective: We cannot share the details of the ‘secret sauce’ until you show us commitment towards funding. We don’t want you to take our ideas to a bigger firm because you cannot fit us in your fund mandate or deal size. Some factors are non-material to us, why do they matter to you? We want to talk to the analysts and question their assumptions? We want to see the Value -Add along with the $$ if we don’t – then we are walking!

My perspective: Maybe there is an inherent mistrust of the Angel Investor/VC ‘s based on the perception that they are trying to advantage of the hard work/dreams of the entrepreneur. In my mind, it is a simple give and take – you want money, you share your secret sauce, that’s how it goes. Don’t be upset that you have to share your IP in order to get funding, that’s what NDAs are for.Transparency is a two way street. (Maybe some of the hesitancy is due to the cultural/social tag associated with sharing intimate details of successful ideas as a large portion of our deal flows we look at are from the BIM (Brazil, India, Mexico) lack of strong IP protection laws, urban myths with deals gone wrong etc. )

2)     Valuations :

This is an important attribute – Not the Numero Uno though that will be # 3. Angel/VC stage  valuation is considered more of an ‘Art’ rather than a ‘Science’.  Valuation is where you will find divergent understandings and oblique views from both the Entrepreneur and Angel.

The Angel/VC Perspective: How often do we hear numbers for valuations from the Entrepreneur, which range from interesting to incredulous? This is a tricky stage as Valuation is more often than not tied to the Entrepreneur’s own assessment or number in the head as to what is fair value. The big question is how did the Entrepreneur arrive at that number? What benchmarks/metrics were used? Can we validate the assumptions used to arrive to get to the band of our internal own low/high valuation?

At BVG we use a STORC model data grid : Size (market size), Team, Opportunity, Revenue, and Competition as we rank & calculate our internal range for valuation numbers. Please don’t tell us that you think your company is valued at $2M+ because a website says so. At this stage we find that maximum number of walkaways happen as the numbers just don’t co-relate to either our comfort levels or of the entrepreneurs. If the entrepreneur’s are looking at just getting us to fund their Salaries & Expenses – guess what – we are walking!

The Entrepreneur Perspective: We have invested our sweat, hard work, and resources in this offering. This is our gateway of realizing our dreams of making a change in the world, being recognized for our efforts and make money. Not to forget that most of us have left a cushy paycheck and are staring at an uncertain future and have gone through a lot of rejections from Angels/VC’s to get here. We know that our idea/offering works. We need your help and $$ to help us scale up, boost our marketing and sales pipelines, and we are selling you tomorrow’s PE multiples. We are giving you a big chunk of our equity to get us to the next stage and yet we find that all you are interested are in a getting to the exit ASAP and having preferential liquidation preferences. Will you really help us, if we don’t get that comfort level then we are walking!

My perspective: This is a very tough milestone in negotiations. In my own dealings – I have tried to be fair to the Founder/Entrepreneur at the same time be aware of my fiduciary responsibility towards the BVG investors. Since we are usually the first funding opportunity after seed round – a lot of entrepreneurs/founders are looking for a validation of their own idea/offering. In some way they almost feel that a lower valuation or an ‘Angel Valuation’ is a comment on the merit of their offering – which frankly it is not. I encourage the folks to come up with a range for their valuation numbers & not have a set/definite number. When questioned on the range/band of the valuation number they should be prepared to defend and share the metrics used. I do the same and sometimes the chasm between the numbers is too wide to build a bridge to cross, sometimes it is a mere footbridge.

3)     Fit :

Fit is about Compatibility and Chemistry between the teams and alignment on majority of the key strategic and operational milestones. Why is this so important? After passing screening phase –  the period from due diligence to deal terms is an intense 3-6 month period of daily interactions – whether it is via email/chat/Skype or in person meetings. How do we work together – if cannot gel and work as a team at this stage – It will be very difficult to maintain and unwind such a relationship stretching over the years irrespective of the success of the venture.

The Angel Perspective: The most important factor in our eyes – is there a fit ? Does the entrepreneur understand our motivations and work with us? More importantly can we work with the entrepreneur’s team? Is there an understanding of where we both come from? Can we both speak the same language as to the vision/strategy/execution – different dialects are welcome :). We appreciate confidence but don’t like cockiness. We deeply value rare skill sets but we don’t appreciate a superiority complex. We love passion but want you to be interested in all aspects of business. We admire belief in the product/offering but we want you to open your eyes around if there are better offerings. Most importantly are you willing to listen, able to execute and look at us as partners, if not then we are walking and will encourage you to walk too.

The Entrepreneur Perspective: We are looking at you for funding and not tech/offering validation every second day. How does it matter to you that our office is in a building owned by my uncle and it is not papered? He is family and I am bootstrapping. Why are you questioning or challenging every statement we make…I came here looking for help not be interrogated. Yes, I want a salary – who is going to pay my bills? Why is it ok for you to call me/my team on weekends asking for last minute updated numbers? My team and I still own the company but it appears you are the new boss?  That is the reason I quit my old job and became an entrepreneur so that I can be my own boss. Why does every meeting lead to more work for me? Remember I got a business to run. We don’t think that you know more about my business than your team yet we have to defend the assumptions/projections?

My perspective: Angel investing is deeply personal.  It’s both a job and a calling.  It’s a lot like panning for gold: looking for the small bits of gold amongst all the other shiny pebbles.  I take what we do seriously; I am betting with my own chips. I am looking to give back in ways that are both personally fulfilling and economically beneficial. I am going to learn a few things as we go. I am willing to be coachable as much as you are. If we are going to be working together for the next 3-5 years in good times and in ‘not so good’ times we need to have chemistry and understanding that we are all part of the same team and working towards the same goal –  a successful exit with lots of money!!


BVG Board of Advisors: Introduction

Hello again! How is everyone? It’s been a while since I got time to get my thoughts together for a post. I wanted to take this moment and briefly introduce the current members of the BVG Board of Advisors.  They are phenomenal people, and they each add so much value to the Blackstone Valley Group that I thought it prudent to share a little biographical information about them as well as my own personal thoughts and observations about what each of them brings to the table here at BVG.

Oh… and just a small disclaimer… I will introduce them in alphabetic order so as not to show favoritism… well, unless you count favoritism towards alphabetizing.  Haha!

First, allow me to introduce Mr. John Bosley.  John co-founded Wind River Capital in 1986 and has been instrumental in influencing a lot of companies over a 30-year tenure in various management and board roles including his tenures at GoldK and Bonaire.

I met John during our engagements at Bonaire a few years ago and we slowly built a rapport and understanding which extended beyond the boundaries of working relationship.

As I started my investor meetings and getting a construct of how BVG would shape up to be, I turned to John on his thoughts.  A veteran titan of the AngelInvesting/VC world, he knew the highs and the pitfalls of this game.  He has played an active role in encouraging and mentoring my actions during my first shaky steps in the Angel Investing world – helping with initial contracts, term sheets, due diligence, so on.  He has been generous with introductions, references and sharing his experiences of both the good and, as he calls it, the “not-so good.” For most of the deals coming in to BVG, he is often my go-to Advisor (him being in Boston helps, too) to get a perspective about the opportunity.

John was gracious in agreeing to be the first on the BVG Board of Advisors, an honor and a validation for the thought behind starting BVG.

John is an avid cyclist and every now and then he disappears to take the challenge of the trail he hasn’t conquered!

To read more about John please go to or visit his profile @


Next on the list is Dr. Deepak Kotak… and speaking of the alphabet, Dr. Kotak or “Dee” (as he likes his friends to call him) has almost every letter following his name: MA(Oxon), MBBS, FRCA, MRCP, LLM.

Dee didn’t rest on these accolades and apart from the medical field (Consulting Physician in London Teaching Hospitals) he also practiced as an attorney for four years in civil law.  He is currently an investment manager for a small private equity fund in the US where he concentrates on healthcare.  Deepak is also the CMO officer of a Texas-based medical device company moving into the commercialization stage, advisor to a US bio-tech, investor and a guest analyst for PropThink.

Dee, I tried my best to summarize the illustrious career; if I missed anything, apologies!

I met Dee many moons ago on a Yahoo! Board/Group of a bio-tech company where we both agreed on the probable direction of the company’s stock price, due to different reasons – his being driven from the knowledge of the drugs/pharma industry and mine from a technical chart reading and investing background – that interaction led to e-mail exchanges, invitation to each other’s private investing networks and lot of late-night/early-morning texts, phone calls, face-time/Skype that culminated in a very close friendship and working engagements.

As we worked together on deals and investments Dee’s ability to look at the Forest and the trees at the same time and show me a different perspective left a lasting impression. As BVG started taking shape Dee was more excited and running ahead than me, and in all honesty trying to catch up with him is what got BVG ready for a launch under 4 months!  When I asked him about joining BVG Board of Advisors, he retorted good naturedly, “What took you so long?”

Dee is one of the smartest minds I have met, and yet he carries this brilliance with a humble grace and ready-to-help attitude to anyone who engages with him.

Dee is an avid tennis player and an accomplished chef often experimenting very successfully with blending of cuisines!

To read more about Dee please go to


And finally, meet Deepak Shenoy.  Deepak is a serial entrepreneur in the technology and financial market spaces.

Deepak writes and manages, and you can follow him at Twitter: @deepakshenoy where his uniqueness lies in simplifying the concepts of markets and economics while explaining financial news and opinion.  He has over 10,000 + followers on Twitter, and over 5K people all over the world read his views daily on email. You will find Deepak’s articles in many online and print publications including Yahoo, Jet Lite, Business Standard and Pragati.

He also does an awesome job at breaking down the enormously complicated Annual Indian budget in layman terms by way of his e-book “Budgetnomics.”  I already have my next year orders with him, hoping he does a paper edition this time around, so that a lot more folks can read and benefit from there.

I stumbled along Deepak’s blog a few years ago and was instantly attracted as a reader and became a fan soon after.  A couple of years ago, I responded to a post Deepak had made on Capital Mind (Reading blogs in the BIM markets and asking the bloggers elementary questions has been a valuable experience and a full-time hobby; not sure if the bloggers who I pepper with my questions share the same enthusiasm) and, lo and behold, he came back with a response. We exchanged a few notes and then the conversations dried up.  The cycle repeated over a few times. As I started BVG, I looped in Deepak to get his insights on the Indian investment opportunities and he promised all help needed to get BVG off the ground from deal pipelines to opportunity assessments.

I met Deepak in person on my first BVG sortee to Bengaluru, India, over hot snacks with tea/coffee one evening. We had one hour allocated for our meeting.  We quickly forgot the time as idea and opportunity discussions started getting a rhythm of their own, and by the time we looked up it was past dinnertime.

I floated the idea to Deepak about joining the BVG Advisor Board the next day. After some initial reluctance (due to time commitments) and me twisting his arm, Deepak finally agreed to join the Board of Advisors @ BVG.

During cricket season weekends Deepak, a keen cricket enthusiast, can be found flopped on the sofa taking in every minute of the game and tweeting, responding to comments, blogging, answering his cell and tweeting in that order J!

To read more about Deepak please go to or visit his blog @ or his website

It is a privilege to know these outstanding gentlemen and count them as close friends and working partners. They have enriched my life in many ways. Thank You, John, Dee and Deepak !



Feet on the Ground


Hello Friends!  Today, I would like to introduce you to a little something at Blackstone Valley Group that we like to refer to as our “feet on the ground” approach. This statement speaks to one of the few basic tenets we model BVG work culture as we interact with entrepreneurs, fellow investors and professional teams across the globe.

Does this approach mean that we keep our feet on the ground and our heads out of the clouds?  Does this mean that we’re a down-to-earth group of folks?  Does this mean that we like to take our shoes off and frolic barefoot in the grass?  At times, any one of these statements might be true… but this is not what I will be talking about today…maybe a later post.

What I would like to bring to light is what we believe to be a key success factor that has helped BVG (Blackstone Valley Group) create a unique position among our peers.

This ‘feet on the ground’ approach refers to us having BVG personnel on the ground, especially in the emerging markets that we focus on: currently India and Mexico out of the BIM (I should trademark this abbreviation — seriously). In fact, I’m on a plane right now as I’m writing this post in order that my feet can be on the ground, which adds a bit of irony, at least, and legitimacy, at best, to this blog entry.

The basic concept evolved as we picked our target markets (BIM) and we found that instead of relying solely on just technology such as e-mail, video calls, WebEx, conference calls, etc., to do business in these focus markets, it is essential to have a “feet on the ground” approach – that is to meet people, see things, gain experience, etc.  We do use technology as an enabler, but not as the only gateway for information exchange.

In this digital age where computers and mobile devices and telecommunications seem to provide us every way in which to connect and stay in touch, what is the reasoning behind jumping on a plane/train/bus/bike/rickshaw and going to the site to meet with the entrepreneurs and see the business operations in person? In our eyes, the relationship between angels and investees is not driven as much by formal contracts and monitoring as it is by relational governance, resulting in mutual trust and an emphasis on mentoring.

For us helping entrepreneurs succeed in the BIM markets has a high level of dependency to the presence of BVG personnel being on the ground with them during our engagement. Getting an opportunity to speak and chat with folks (other than the management team) with direct strings or a couple of knots away with the venture/startup– including the local and regional regulators, politicians, bureaucrats, land/premise owners, directors, shareholders (usually friends & family), neighbors, CAs (Chartered Accountants in India & CPAs for us here), attorneys, is a valuable and increasingly essential exercise. These discussions/meetings whether in an formal or informal setting form an integral part of what we refer to is situational awareness about the opportunity we are interested in. It also helps us gauge the impact of these exogenous factors to the venture/project we are looking to invest in.

A recent experience where this approach influenced our thoughts and decision-making process came during my recent visit to Torreon, (Coahuila) Mexico. I was there to evaluate an opportunity we had screened and had potential to be looked at deeper. It was an e-commerce offering to the commercial/retail sector with the pilot slated to coincide with my visit. As luck would have it, things started off not so well (something which entrepreneurs get very nervous about…my 2 cents: don’t be; we all have been there).

A note here is that the office premises these folks were based in were in the industrial zone outside the city – which was surprising and concerning at that point of time. The office space consisted of a rented area in a ‘virtual office’ type new building (still under construction), which also had provisions to house warehouses, small workshops and offices.

As temperatures begin to soar both internally and externally, I decided to venture out and check the facilities in total. Walking outside, I bumped into the facility owner and in due course shared with him the reason for my visit. I was curious as to why the entrepreneurial team was renting office space for their startup in the industrial zone – was there a tax benefit? Was it a resource issue? Or was it just economics.

The answer surprised me. He said the reason these guys are here is because his facility is the only private owned enterprise in the area offering faster bandwidth, data center hosting, private VPN, COB/DR off site storage. The team needed fast connectivity and were unable to get the project going as the only offering in the market was from the Govt.(Electric Company  – Capped Broadband ) or the University ( which offered connectivity based on strategically placed microwave transmitters – in certain residential/commercial/industrial areas of Torreon–interesting approach isn’t it?)

Another, key point revealed was that due their presence in this particular industrial areas they were able to connect with fellow renters and area commercial/factory owners giving them their first subset of paying customers. (in the interim, I was getting an SMS update every 5 minutes as to the progress  or lack thereof made to get the Pilot kicked off – whose costs got to a colossal scale as my AT&T bill came through) 

The entrepreneurial team was one of his the first clients to sign up when this facility was announced and as such they benefited greatly with low-capped rents – no deposit (hence no capital tied up) for the next 3 years. Plus using a hybrid SAAS model, they could scale up without spending big $$ on hardware etc. The facility owner praised them for their work ethic, go-getter attitude and their willingness to improvise to manage fluid situations as the one evolving now with power & firewall issues. 

As luck would have it the pilot kept hitting hurdles and the entrepreneurial team was increasingly nervous and getting agitated, as I was slated to be there only for 2 days, and by end of day 1 they had nothing to show.

The conversation I had with the facility owner motivated me to extend my stay. This vote of confidence got the entrepreneurial team going and they got the Pilot off the ground by end of day 2, giving the team in Boston and me an opportunity to evaluate the offering.  We are in due diligence phase with them and are excited that pending any colossal failure during due diligence we will be adding them to our portfolio.

This brings into the discussion the $$ cost vs. benefit of this approach. This is a bit of a challenge to address as folks find the ‘costs’ (time, air-fare, hotel, meals, ground transportation) to be real and ‘benefits’ (intangibles to the most part) difficult to reconcile. But based on our experiences we do find some tangibles coming to us as ‘benefits’ of this approach.

Yes having one or other member of the BVG team (mostly yours truly) criss-crossing the oceans with a regular frequency does add up but the feet-on-the-ground approach shaves of a few percentage points from our due diligence costs.

As I close this post, I feel privileged to speak and interact with my audience – my readers. Your comments and feedback are vital and essential in my learning curve and a big factor motivating me to share my musings with the world using Technology.