Help, my aggressive angel investor is trying to sue me!

Here, we talk to a company founder about their nightmare encounter with an angel investor.

Angel investors – one of the ways to get funding and support from start ups – can help you grow your business quickly.

But taking private money from a high net worth individual or angel investor can quickly turn into a nightmare if you’re pressured to sell your stake and ultimately lose control in the company that you’ve created.

Here, we talk to one travel tech entrepreneur, whose angel investor has twice tried to take over majority share.

How did they meet the angel investor?

The investor who was discovered at a business dinner at a networking event (when new capital wasn’t needed in the business). But soon after, the founder discovered the tech platform it was currently on couldn’t take non-western characters and so they had to rebuild the website to become a global platform. The angel investor immediately offered to invest in late 2012.

The angel, who had a VC background, was a seasoned investor and had been involved with many businesses.

However, he turned on the founder and became ‘aggressive,’ and even threatened to sue them and sent a legal letter saying they had contravened the shareholders agreement. This was ignored. ‘He added no value to the board only stress and pressure,’ the founder said.

‘His idea is 80s style – if you beat up the board, they’ll somehow work harder?

‘I ran out of money and he tried to take over.

‘He’s a bully.’

‘I needed someone with tech experience to invest in my business as I didn’t have tech experience and the project I’d embarked on was way bigger than I’d realised.’

So, how did the founder and managing director manage to navigate this issue? Luckily, the firm had the backing of the development company (the major creditor) to find another investor and so that bought them time. Eventually they found another investor in 2014, who had a team of developers in Bangalore and was an entrepreneur and software engineer and then kept majority.

‘He managed to manage the last push to finish the platform and reduce our development costs by 75 per cent! Now that’s a great investor!’

Are angel investors worth it?

Despite the bad experience with the aggressive angel investor, who has now left the board of directors but remains a shareholder, the founder remains positive on the impact they can have on growing businesses.

‘Simply, the company wouldn’t be where it is without their financial support. You have to remember that investors want a return and they get frustrated if their timeline isn’t the same as yours.

‘Our platform took a lot longer to build and go live and so the aggressive investor has got very frustrated.

‘Now it’s live and doing well, so he’s more relaxed.’

Further reading on angel investors

Key things that entrepreneurs should be aware of when signing T&Cs and shareholder agreements.

‘Get a commercial lawyer to help you with shareholders agreements and watch out for onerous clauses. Minority shareholders need to be protected, but you need to ensure it doesn’t bootstrap the board with needing constant approval from shareholders,’ the founder says.

Can an angel investor steal my idea?

Short answer is ‘yes’ but if you have an NDA, you have some protection. Problem is paying legal fees to prove they’ve stolen your idea and they usually have deeper pockets. However, once a business gets going, they’re unlikely to ‘steal’ your idea because they want you to execute it! A VC once said ‘an idea isn’t a business until someone has paid something for it’ (basically your first sale!) I thought this was an excellent definition.

Michael Somerville

Michael Somerville

Michael was senior reporter for from 2018 to 2019.