France – America’s First Angel Investor

Last week, I was privileged enough to attend various presentations at the Washington D.C., Maison Francaise, in connection with the French-American Business week. I noticed what a great location in Washington (right near Georgetown University) and what a large footprint is occupied by the Embassy and the Maison Francaise.

One of the presentations featured Phillipe Bourguignon, the first European on the Board of E-Bay (back in 1998) and currently the Vice Chairman of Revolution Places, Steve Case’s ambitious new project to bring venture capital to “all the other places” (e.g., everywhere that is not Silicon Valley and New York). He has many other successful endeavors under his belt but I’ll leave you to look him up on LindedIn.

Among various topics, Phillipe spoke about some of the differences between France and the United States, especially in regard to “appetite for risk.” He felt that American investors are often more willing to accept risk and bet early on ventures that might fail.

Perhaps that is true today, but as I reflected on his comments, I realized that this was not always the case for France. Perhaps some of the lessons of France’s greatest “Angel” investment, are applicable to many of my clients – especially my cherished start-ups!

Start-up clients are always hungry for money, resources and help. When approached by investors, at the Angel round, that first round of fund raising when they are usually most desperate, some investors ask for terms. These terms are not commercial terms (price, valuation, percentage), which are always fair to negotiate at these rounds, these are instead terms of “control.” These terms might include investors wanting to put themselves on the Board of the start-up (which usually doesn’t exist at that time – there is only the Founder and those who believe in her idea – not yet enough for a Board).  Other investors want the right to veto certain decisions or second guess the Founder’s spending decisions.

In these cases, I always advise the Founder to walk-away. At the Angel Round, either the investor believes in you or they don’t.

And this is where France comes into the picture. There was once a desperate start-up called the 13 Colonies. These Colonies had an idea, which idea was partly borrowed from a French man named Rousseau (a one-man think-tank). France took a chance on the 13 Colonies. A Bourbon King actually became an Angel investor and sent money and resources to the new start-up, and like all good Angel investors, France did not ask for control of or seats on the Board of the 13 Colonies. Instead, they invested with their hearts and mind because they believed in an idea.

Angel investors of successful ventures are rewarded handsomely, the little start-up rebranded itself as the United States of America, and almost 150 years later the Angel Investor was rewarded for its belief in the 13 Colonies when, General “Blackjack” Pershing on his arrival in Paris, was quoted as saying “Lafayette, we are here.” General George Patton, with a similarly good heart (and the Seventh Army), repaid much of the rest of our debt to our Angel Investor twenty-seven years later.

This early investment and belief in the American start-up explains why the French Embassy is so large and why it occupies such a prominent space in Washington; our first Angel investor deserves a preferred location as a reward for the preferred equity which it would have received.

Not every start-up has an initial group of founders with names like Washington, Jefferson, Franklin and Adams, but if they did, it would make investing too easy – everyone would fund them through IPO. Instead, Angel investors, those looking to the first investments, need to look for their own 13 Colonies, and they need to play the role of Lafayette, and help the investments strategically, but not impede or stand in the way of growth. For that first investment, one either believes in the Founder, and their ideas, or one doesn’t. If one doesn’t – then don’t invest. Would the 13 Colonies have accepted an investor who demanded that they be made Chairman of the new country? The question is rhetorical.

I do tell my clients, however, that it is appropriate, after the start-up is up and running, (at the Series A round for example) to start discussing control terms, which might involve the investor asking for Board seats and greater oversight and even some little control. Similarly, it is appropriate that today, now that the start-up has been running for more than 240 years, that the treaties between France and the United States are complex and nuanced, reflecting the rich and deep relationship between these two countries.

And so, during this period of French elections, I hesitate to get a little bit political, because I focus on business and legal matters in my practice, but I would like to remind the French voters that France has always been at its best when it looked outward and took risks to spread its fundamental values and great ideas of humanity. Even under a King, France was willing to be an Angel investor and risk their capital and not think like a provincial banker, unwilling to lend money without the greatest of collateral.

Ramsey Taylor – Founder, Owner @ Taylor | Legal