When Angel Investors Says No

Angel investors are the best source of funding for early-stage businesses and even
though they review thousands of financing applitions every year, only a small
percentage of enterprises will actually receive their needed pital. Known for
their high-risk deals, there are a few rules that may influence an angel inor’s
decision in rejecting an inment opportunity. Here are some of them.

Rule no. 1- Trust intuition
Most experienced angel inors will use their instinct when deciding
on a particular inment. They are influenced mostly by factors such as credibility
of the proposed business plan, the entrepreneur’s presentation, due diligence
findings, etc. If an angel inor experiences any ubt regarding a particular
inment, they will simply reject the applition.

Rule no. 2- Avoid underfunding
Often times, entrepreneurs have the tendency to underestimate the costs
needed for their businesses and request an extraordinarily “small” amount
of pital from inors. While the process of writing a check is a simple one,
it n never compare to the difficulties associated with making the expected monetary
return. Angels are well aware most of these “underfunded” companies
will eventually generate very little or no return. The under funded company will
most likely seek additional funding to compensate for their losses, and angels tend
to stay away from companies that may require these follow-on inments. In their
eyes, an underfunded company is worse than providing no funding at all.

Rule no. 3- Always underestimate an entrepreneur’s credibility
Entrepreneurs also have the tendency to assure their inors their company
will be successful, despite its failure in the end. It is crucial that business
owners demonstrate their company will succeed in both the short and run by
ing out every conceivable aspect that may happen during the inment span.
In addition, a strong management team should also be implemented.  These members
should be knowledgeable about the short and -term gls. Angels should always
underestimate an entrepreneur’s credibility until they have demonstrated competence.

Rule no. 4- Angel team advantage
While most angels are able to alone and have the knowledge and skills
to make sizeable inments with confidence, others may often in groups, where
their inments are highly influenl upon what other angels in in. Their
conformist ways may be beneficial beuse when angels work together, they are able
to learn and process opportunities faster than when ing alone.  

Rule no.5- The importance of rule-making
Most experienced angels will abide by certain rules they make when ining.
They are keen on how much they n in in each year, which industry sectors to
focus on, and the amount of expected return. Regardless of how fantic an entrepreneur’s
pitch is or how promising an investment may appear angels should always avoid temptation
and abide to their set rules and perspectives.

Rule no. 6- Experience
Most angel investors were once entrepreneurs themselves, and the best inditor
of their success is their previous success. An experienced angel has detailed knowledge
on how to , run, and sell a company as well as experience with learning from
past mistakes. An angel inor will typilly select inments according to
their area of expertise and avoid inments that were proven to be unsuccessful

There are certain characteristics that make an investment opportunity appealing
to angel inors, including a well-trained, experienced management team, the size
and timing of the market, and the unique quality of goods and a company
offers. As simple as these requirements may be, the majority of funding requests
made by entrepreneurs will be rejected. Angels n protect their money simply by
employing six different rules to avoid inment mistakes.