Wednesday, January 9, 2013

When Angel Investors Say NO

- When Angel Investors say NO!  -

 The best source of funding for startups and early-stages businesses are angel investors. As most startups are high-risk, the investor spends a great deal of time contemplating and researching the venture. If you want to increase your chances of getting funded on PitchStreet, you must know the 6 rules that help investors when rejecting an investment opportunity. Here are the six:

Rule no. 1- Trust intuition

 The number one rule an investor will abide by when deciding on a particular investment is their intuition. If they have any doubt at all about your investment, they will simple decline your offer. Of course, the most influential factors when deciding are the entrepeneur's presentation, business plan, market strategies, and due diligence findings.  But you can never switch an investor's first feelings on an investment.

Rule no. 2- Avoid underfunding
 In investor's eyes, an underfunded company is worse than providing no funding at all. When an entrepreneur pitches an investor with an exceptional "small" amount of capital needed, the investor will understand that these "underfunded" companies usually generate very little or even no return. Once a company is underfunded, they don't like to write another check, and new investors will stay away from companies seeking extra funding after their initial amount has been made.
Rule no. 3- Always underestimate an entrepreneur’s credibility

 Anyone can talk, but not everyone can deliver. Entrepreneurs will go out of their way to assure their investors that their company will be successful. But truth be told, most start-ups fail which is not what investor are expecting when putting their capital into a business. To ensure that your investor stays happy, you will need to succeed in your company's short and long term goals throughout the whole investment span. In addition, you must have a strong management team, all knowledgeable about the company's goals. Angels will almost always underestimate an entrepreneur's credibility until they have proven them otherwise.

Rule no. 4- Angel teamwork advantage
Most angel investors are capable of working alone. They have their resources, networks and knowledge. But many do like to work in groups where they can team up together and learn the process faster than when working alone.
Rule no.5- The importance of rule-making

Most angel investors have their own rules that they abide by when making an investment, each that compliments their investment preferences. They like to keep to their investment budget each year, their industry focus, and their expected return from each investment. As much as an entrepreneurs pitch might be promising or tempting, they will usually end up sticking to their set rules an perspectives. 
Rule no. 6- Experience

As you know, most angel investors have been through what you, a thriving entrepreneur. Their current success is usually an indicator of their past experience and work ethics. They will have the pertinent sources of how to start, run, and sell a company, as well as experience from learning from their past mistakes. An angel investor will usually select investments that match with their expertise and steer clear from investments that don't have a promising track record. 

It is a given that no two investors are alike. They have their own investment rules, preferences, and experience to back them up. But these six rules I have listed above, almost all angels use to protect their money and avoid investment mistakes. Make sure you have these covered to ensure you fund your company on PitchStreet.

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