An angel investor is one of the most influential people in your company. They are there to provide you with money for your start-up, and they might be the only person who does that. When an angel investor wants to provide funding for a new business venture, they have many considerations. You want to make sure that you don’t do anything to turn them off from investing in your idea! In this blog post, we’re going to go over five things that could push an angel investor away from investing, in your opinion.
Let’s take a look at these reasons.
1. You purposely mislead people
This is a grave offense. It can result in the investor becoming suspicious of all your claims and information, leading to them being cautious about future deals you bring before them. Suppose they have concerns with past representations made by you or any other member of your team. In that case, it could put the entire deal at risk for closing if their fears are not assuaged quickly enough (i.e., during this meeting) and ultimately.
2. You’re not passionate about the business
Investors know that if you are behind a product, service, or company, it is because you genuinely believe in what you’re doing and have an undying passion for its success. If they sense even a bit of hesitation on your part, there may be some doubt as to whether this investment will really bring them any return on their money. They need confidence that this isn’t just another passing fancy of yours but something with long-term potential and viability for market share leadership within your particular niche/industry; this means more profits down the road when compared to other deals currently available at similar risk levels across multiple markets around town today (i.e., from different companies).
3. You don’t do your homework
Investors want to know that you have researched their backgrounds and experience before asking them for an investment. They need to feel confident that this opportunity is the best one they currently have available within their portfolio today; otherwise, they will doubt its future returns against other deals out there across multiple sectors in which they are already involved.
This means doing some serious due diligence before meeting with them to avoid wasting either of your time. You can find information about many investors online – including articles highlighting why others choose specific individuals/firms over others when working through funding options.
4. You do not even follow through on your promise
They will not deal with you again and may tell others to avoid your company as well. They do not think it has potential: investors are investing in the future of their money, so they want to know that something is promising about this business for them to get involved in. If they feel like your idea or product does not have a powerful value proposition, they will walk from the scene immediately before wasting time on further research and meetings, which might lead nowhere.
5. Your anticipated costs are excessive
Your unit economics don’t add up: Unit economics refers to the revenue and costs associated with producing or delivering one product, such as an app download or physical item like a pair of sneakers. This is not a deal-breaker, and if you are asking for too much money, it will be challenging to convince an investor. Keep your costs low enough to make back their initial investment within three years (five at the most), or else investors may ask themselves why they should invest when they could buy the company without giving up any ownership share.
Investors want to know how fast your product will sell: Investors also want assurances that there’s good market potential ahead for them, so describe what makes this particular industry attractive right now. If possible, show data on where you expect demand over time based on demographic trends, economic conditions, etc., since precise numbers help reassure investors who might otherwise worry about whether investing in your company could turn out to be a waste of their money.
6. Your projected expenses are unreasonable
Your projected expenses are unreasonable. This could be because you have little, unattainable goals or that your budget is too low for what you want to accomplish. You can still get an investor on board if the numbers seem right, but it will take more effort and time than if you had set reasonable expectations in the first place. It’s important to research how much money similar businesses raise at different stages of development before trying to determine your own funding needs.
The Bottom Line
When you think about pitching an angel investor, don’t just focus on the positives. Your priority should be to identify and quantify what might go wrong with this deal and how you will address those issues upfront. We hope you are now aware of what things can make an angel investor walk away and what you must avoid.