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  • Writer's pictureLeo Wang

Lesson 3 in Angel Investing: Empty cup

Original Chinese Version on July 18, 2013: HERE

In ancient times, a person with deep knowledge of Buddhism heard about a highly respected old Zen master in a certain temple and decided to visit. When the master’s disciple received him, the visitor was arrogant, thinking to himself: “I am a person of deep Buddhist learning, who do you think you are?” Later, the old Zen master received him very respectfully and brewed tea for him. But as he poured, he continued to do so even when the cup was clearly full. The visitor asked puzzled, “Master, why do you keep pouring when the cup is already full?” The master replied, “Yes, why indeed keep pouring into a full cup?” The Zen master’s point was that if you believe you are already so learned, why seek more teaching? This is the origin of the “empty cup mentality.” It is also a warning to those who are arrogant and complacent.

In angel investing, since the investment is made very early, the risk is correspondingly highest. To control this risk, it often requires that the investor has sufficient understanding of the field of investment and has enough resources in the industry to assist the project. Therefore, typical angel investors do not invest in fields they are not familiar with, nor do they invest in matters where they cannot offer assistance.

From another angle, angel investors seem to be “experts” in the industry, often overly critical of projects and dictatorial in their advice, which may lead less confident entrepreneurs to treat the investor’s words as gospel. Their own strategic planning sways under the “guidance” of different investors, leading to an eventual failure.

I believe that angel investors in high-tech fields such as technology, new media, telecommunications, and the internet should not possess the “full cup” mentality of considering themselves experts, believing that after seeing 1,000 projects, their words are the absolute truth. When looking at projects, they often exhibit the following faults:

  1. The entrepreneur starts to tell their story, but is interrupted immediately with a dismissal: “No need to say more, I know… it definitely won’t work… this way or that…”

  2. They continually interrupt the entrepreneur, expressing skepticism or asking endless questions without allowing the entrepreneur to finish speaking before posing questions.

  3. They often recount their own success stories to prove the correctness of their judgment and to use the “authority of the successful” to “hypnotize” the entrepreneur into becoming their “follower,” to follow their thinking.

Although I am aware that the quality of entrepreneurial projects in society is uneven and some entrepreneurs indeed cause a general aversion among most investors, it is inevitable. However, most entrepreneurs who manage to sit across from you at your desk are basically “promising,” and they should be treated with the greatest respect and an empty cup mentality. At the very least, let them present their business plan in full and humbly inquire about the entrepreneur’s expertise and skills in the field. Understand their background and achievements, their personality and experiences, feel their entrepreneurial passion and indomitable spirit, become a “fan” of the entrepreneur, ask about their vision for the future, and try to enter the future world they describe. Experience a future you might never envisage and see if it can dilate your pupils!

The biggest taboo for an angel investor is to act pretentiously, as it does not benefit the “main objective” of investing in good projects and may actually have significant negative effects.

With the rapid development of technology and cultural changes, past successes can easily become stumbling blocks for future judgments. If it’s not “the truth,” it surely has an “expiration date.”

Those who have made money by various coincidences and have started angel investing should be wary of using “expired” “pseudo-truths” to judge “entrepreneurial projects facing future trends.”

I know this is difficult, but it is also the charm of angel investing. If, ten years ago, entrepreneurs like Jack Ma, Pony Ma, Robin Li, Charles Zhang, and Zhou Hongyi came to you for financing, what kind of judgment would you have to make to decide to give them the money?

I think, only by having a reverent attitude towards the development of future technologies, the cultural changes of future consumers, and the ability of fully committed entrepreneurs to grasp the future and adapt to changes, there might be a chance to invest in great innovative companies like PayPal, Skype, Google, Facebook, Salesforce, Tesla, and SpaceX.

The greatest challenge for humanity is “imagination,” not execution. The future is not something investors “think up,” but something entrepreneurs “do.” So, we come back to the content of Angel Investment Lesson Two: “Harmony in People is Most Valuable.”

“When three walk together, my teacher is among them!” Invest your money in your “teacher,” not your “follower”!

Finally, if you Google “Angel Investment Lesson One” and “Angel Investment Lesson Two,” you can see the articles on “independent decision-making” and “harmony in people is most valuable” that I wrote in the past two weeks.

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