Smart money is the term used to describe capital that is controlled by institutional investors, market mavens, central banks, funds, and other financial professionals. These investors can access more information, resources, and expertise than the average retail or individual investors. They can also influence market trends and stock pricing through trading volume and investment decisions.
One of the ways that smart money investors can invest in startups or companies is by being on their board of directors. Another way is by writing a check as an angel investor or a venture capitalist. Both approaches have pros and cons and require different skills and strategies. In this blog, we will compare and contrast the benefits and challenges of being on a board vs writing a check as two ways of investing in startups or companies. We will also provide some tips on becoming an intelligent money investor in either case.
Being on a board of directors means that you are part of a group of people elected or appointed to oversee the management and governance of a company. Board members have various roles and responsibilities, such as setting the company’s vision and mission, hiring and firing executives, approving budgets and financial statements, overseeing compliance and risk management, and representing the interests of shareholders and other stakeholders.
Being on a board has several advantages for smart money investors. First, it gives you more influence over the company’s strategy, performance, and direction. You can help shape the company’s culture, values, and goals and ensure they align with your investment objectives. Second, being on a board gives you more access to the company’s information, operations, and network. You can get regular company progress updates, financials, and metrics. Third, being on a board gives you more oversight over the company’s governance and accountability. You can ensure that the company follows the best practices and standards regarding ethics, transparency, compliance, and social responsibility.
Some examples of successful board members who have added value to their portfolio companies and achieved high returns on their investments are:
Writing a check means providing capital to a startup or a company in exchange for equity or debt. You may invest as an individual angel investor or as part of a venture capital firm or a fund. You may support at stages of the company’s lifecycle, such as seed, early, growth, or late stage. You may also invest in different investment vehicles, such as common stock, preferred stock, convertible notes, SAFE agreements, etc.
Writing a check has several advantages for smart money investors. First, it gives you more flexibility and diversification in your portfolio. You can invest in multiple companies across different industries, sectors, geographies, and stages. Second, writing a check gives you more liquidity and returns on your investment. You can benefit from the appreciation of the company’s value over time as it grows and scales. Third, writing a check gives you more exposure and access to new opportunities and innovations. You can discover and support promising entrepreneurs and ideas that have the potential to disrupt the market and create a positive impact.
Some examples of successful check writers who have backed promising entrepreneurs and innovations and generated significant returns on their investments are:
Being on a board and writing a check are two different ways of investing in startups or companies with pros and cons. The main similarities and differences between them are:
The trade-offs and considerations that investors should take into account when choosing between being on a board and writing a check are:
Some best practices and resources for investors who want to learn more about becoming smart money investors on a board or writing a check are:
In this blog, we have compared and contrasted the pros and cons of being on a board vs writing a check as two ways of investing in startups or companies. We have also provided some tips on becoming a smart money investor in either case. Smart money is the capital that is controlled by institutional investors, market mavens, central banks, funds, and other financial professionals. These investors can access more information, resources, and expertise than the average retail or individual investors. They also can influence market trends and stock pricing through their trading volume and investment decisions. We hope that this blog has been helpful and informative for you. If you have any feedback or comments, please feel free to share them with us. We would love to hear from you. Thank you for reading! 😊