Why An Angel Investor Will Choose Not To Invest In Your Start-Up
Updated: Apr 2
Angel investors think long and hard and do an ample amount of research before choosing to invest in any start-up. What’s clear is that no investor or buyer will invest in a company they have no faith in, think will not succeed or is generally not worth their salt. This is regardless of the amount of money or connections you may have. It’s important here to know what exactly angel investors look at as deal-breaker in terms of investment. It should be noted that angel investors are in a sense of the word gamblers. They are taking risks when they invest in a company and as such will make sure that this risk could be worth it.
Trust is everything
When angel investors put in money for a start-up, they do their research well. If they find any discrepancy in your business or even fabric of evidence that shows any wrongdoing, it instils instant mistrust and as such will cause them not to invest in your start-up. You must be honest with your investors. Lying or misleading them in any way can cause a drastic impact. Lying about funding, profits, and contracts is all a strict no-no.
Underestimating the competition
If you start a business be sure to understand that you will have some big competitors. Even if you think the population demographic you’re planning to target is a unique one, there will always be competition. Failure to understand this leads to drastic effects. You must be able to show your investors how you will solve that problem as well as go on to make profits. If an angel investor doesn’t believe your company has the potential to deal with the competition, they will not invest. To deal with the competition, the start-up must provide investors with unique ways of countering it at the same time doing it cost-effectively.
A missing business plan
A business plan is the backbone of the business. It showcases everything in detail the start-up is planning to do in terms of marketing, growth, hiring of employees, etc. The business plan also shows your investors where you are planning to take your business as well as what strategies you employ. Besides, your business plan must be a unique one. Make sure that you exhaust every avenue. Investors gain a lot of opportunities to invest and as such it will take even the smallest of things to prevent them from investing.
As a start-up, your primary goal is not just to advance the company but also to cut whatever costs you can at the same time. An angel investor’s only reason to provide the company with money is for profits. As such if they notice start-up founders wasting that money on useless items or worse awarding themselves the money, it will discourage them from investing.
To sum up
As an entrepreneur, the toughest part of the game is to rightly convince an angel investor or venture capitalists to believe in your start-up. These are just some of the avenues you must focus on to gain that funding. You must showcase your business's shortcomings; however, showing the advances you have made is equally important and necessary. Provide accurate data and statistics to showcase what your start-up is looking to achieve. That along with a strong group of employees will surely help you succeed.
About Devansh Lakhani
Director of Lakhani Financial Services, and a Chartered Accountant, he helps start-ups raise funds from his network of investors. He guides and advises start-ups to scale up by providing efficient sales, marketing, team building, and business management strategies. He has executed fundraising by block deals on the stock exchange and conducted IPOs and right issues on the SME platform to the tune of over Rs. 50 Crore. He is currently working with start-ups from various sectors to help them channelize their business models and investments.