One of my favorite Dave Berkus quotes is: “Never, never, never run out of money.”  But inevitably, it happens to some startups.  What then?  Your VCs and lenders will likely impose onerous terms, and your ownership will get badly diluted.  The one group of investors you can count on to support you in a crisis are your Angels, and I saw two examples over the Holidays.

Two companies, with funding from the Pasadena Angels and Tech Coast Angels, ran out of money and needed a few hundred  thousand dollars to reach the next stage in their growth–an exit for one, and profitability for the other.    I won’t mention their names, as it would be inappropriate, but both are LA-based companies that have been operating for several years.

Over a few short weeks during the Holidays, groups of Angels, one  led by Dave Berkus, raised enough money to secure the futures of these companies.   A Christmas miracle, indeed.

The terms?  Emergency cash is never free, even from Angels.  I saw the deal terms for both, and invested in one company.  The terms were the same as the prior raise, plus a modest amount of warrants as an incentive to close quickly.  No cramdown, no significant dilution of management.

This story highlights a key point–unlike many other investors, Angels are there for you in a crunch.  We all expect to make more than one investment in companies, and so long as the business is making progress, are a great source of small to medium follow on rounds.  Even in a crisis, Angels typically rally around their companies, rather than using the maximum leverage to drive harder deal terms.

I often hear from fellow entrepreneurs that raising money from traditional Angel groups is difficult, and it can be true.  But there is another side to the story–once your Angels are on the team, they are there for you in good and bad times.   It’s something to remember when you’re deciding whose money to take.