Today, almost all entrepreneurs approach angel investors to get funds for their startup. Angel investors are individuals that provide seed capital for new businesses. For securing an angel investor, you should always have effective skills. No one will come to you if you lack some experience in getting funds. There are many entrepreneurs who failed to get money for their business because of some mistakes. In this article, we will see the mistakes entrepreneurs make while finding an angel investor.
Mistakes Made While Finding An Angel Investor
1. You Don’t Tell About Your Business Goals
Entrepreneurs who try to tell about their products and services and not about their business goals tend to fail miserably. An angel investor is much interested in knowing how your company will solve a given business problem. Products and services are meant for the customer, and angel investors will get nothing from them directly. If an angel investor somehow wants to know about the product, do not start describing how it works. On the other hand, if you have a problem while explaining your business, you can write the plan on some paper. In addition, you should have an estimation of how much revenues could be generated from your products or services. Thus, you should have some assumptions about a few aspects of your business.
2. You Confuse Them With Too Many Numbers
The two most important figures to tell about your business are sales and revenues. Angel investors are busy individuals, and if you flooded them with too many figures, they will look for some other company to invest their money in. You should not tell them about the complex statistics associated with your business growth. These data are meant for other professionals such as financial analysts, chartered accountants, etc. In most cases, angel investors do not have so much knowledge about calculations. You are wasting his or her time by telling about other evaluations.
3. You Tell About The Sales Predictions
New startups have nothing to do with sales forecasts because they have not reached that point yet. When your business starts growing, sales history will become a part of it. In the growing stage, there can be fluctuations in the market which could change the performance of your business. Your company will see several ups and downs during its journey. Thus, telling about sales predictions will be a great mistake while asking for funds with angel investors. Instead, you can explain the benefits of your product that would generate more revenues. This will be an important piece of information for angel investors.
4. Your Business Plan Have Too Many Restrictions
A business having plenty of restrictions is something most investors tend to ignore. This is because they do not find any chance for the growth of your business. For example, if some of your products or services that could possibly have leasing options cannot be leased, the angel investor will not support your business. This generally happens with some angel investors while others could provide funding support. Each angel investor has his or her own perspective while understanding your business. Sometimes, you have to work beyond your business protocol in order to get money.
5. Not Learning About The Angel Investor
This is also a common mistake that entrepreneurs make. Approaching an angel investor is much similar to going for an interview to bag a job. You should try to learn a few things about the investor who will support your business. As you are approaching them for money, understanding his or her preferences will surely help a lot to your company. Also, try to be formal while having a meeting with them. Going casually will get you no financial support. Angel investors are very particular in choosing the startup companies to invest in their money.
6. Considering The Ownership Stakes
At the initial pitch, you should try to avoid the topic of ownership stakes. It’s much like putting a high price on your product or service. In the next meeting, you could discuss the stake in your company. Your ownership rules should be flexible for some investors. One point to consider while approaching investors is to build a business relationship with them. They will have their stake according to some mutual agreements. In some cases, you have to give some independence to these investors.
In this article, we have seen six major mistakes people make while finding an angel investor for money. You can easily get angel investors for startup if you manage to learn from these mistakes. All angel investors have their own preferences. Some might like your idea while others could simply hesitate to support you. You should understand that their time is valuable. Making a first good impression will easily get your work done. If you failed to get one angel investor, you should go for another because getting financial support requires lots of patience and effort.