It only takes being burned by an angel investor once for an entrepreneur to realize that promises are only as good as the person or group making them. There are many type of angels in the world out there and most of them are honest, hard-working people. They want to see you succeed because your success translates to their success.
Every so often, unfortunately, the promises of angel investors don’t materialize for whatever reason. Whether you’re working with a network, “super” angels, or individual angels who are accredited investors, a deal that sounds too good to be true generally is.
The Sure Thing That Isn’t One
Most entrepreneurs have a pretty similar experience when it comes to networking with angels when trying to raise some cash. It usually involves some lunch or dinner meetings as the angel performs their due diligence. You might invest plenty of time only to be told “Sorry… not for me.” You might even get a verbal commitment, but nothing in writing and no money headed your way.
It is more common than not to see a sure thing become something that is far from one as an entrepreneur. If all you’re getting from an angel is a “maybe” commitment, then you’re really being told “no” and the angel is hoping you’re just going to go away one day.
Due diligence does take time, but it doesn’t take a lot of time. If you have an angel that wants to meet for more than a year, then you’re just being strung along as an entrepreneur. Sometimes an angel is just waiting around because they don’t want to be known as the “first investor,” but more often than not they just don’t have the courage to tell you that your project isn’t for them.
A Signature Is More Important Than a Promise
About 99% of the responses you’ll receive as an entrepreneur when seeking investments from angels will be negative. When you encounter that 1% which will give you an affirmative answer, it can be easy to take that positive energy and run with it. Before investing your own cash into developers, platforms, and other needed assets and infrastructure, it is vitally important to get more than a verbal commitment.
Without a signature, you’re allowing an angel to open up the back door and get out of the verbal commitment. Someone might tell you that their word is their bond, but a signature makes for a better guarantee than a handshake and a smile ever will these days.
Angel investors want to see profits coming your way as an entrepreneur. Immediate profits are the best thing possible. A positive cash flow is better than nothing. If all you’re creating are expenses, then you can believe a promise is genuine all you want, but the angel investor will be trying to find a way out of a bad investment while you’re believing in their promises.
There Needs To Be Angel Specialization
Experience is more important than cash. That’s not to say that cash isn’t important. You just can’t go up to any angel investor and expect that an investment from them will bring you a better chance for success. Finding investment resources that have experience within your field of industry are what will drive you forward.
Many angel investors don’t want to be involved with the daily tasks that must be completed for a startup or small business to be successful. They want you to do your job as an entrepreneur and help their investment come back with a healthy return. Yet if you’ve got a question, a quick call to a knowledgeable angel who is familiar with your industry can give you a better set of directions to follow than an educated guess.
Ultimately it is your goal as an entrepreneur that must be examined if angel investing is going to work. Far too many entrepreneurs are blinded by their desire to grow their business using other people’s money that they miss the details an angel investor is giving them with every meeting.
You need to have an eye for details to grow your business in the first place. Use that perspective to perform your own due diligence on the angel investors you’re going to approach for a cash infusion. When you do, you’ll be able to find the angel investors who will do more than pretend to be interested in your project or offer you empty promises that cost you time and your own reserves.
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