When start-ups or high-growth businesses go to Angel investors seeking funding, and they receive a no, it’s never just a no. Angel investors try always to give feedback and reasons why it is a no, or not this time, advice on what could be added or subtracted to the business idea. Regardless of whether a start-up or a business, in general, is looking to be funded, they stand to learn a lot from Angels Investors, they have been around the block. Let’s take a look at five things start-ups can learn from Angles Investors.
What are Angel Investors?
An Angel Investor is defined as a high net worth individual that personally invests money into entrepreneurs or small start-ups to gain ownership equity of the business in return. Angel investors go by other names such as seed investors, angel funders and private investors, and they are usually an entrepreneur’s friends or family. The investments that angels’ investors make may be to fund a business one time to help them get off their feet, or it could be a long-term investment that will see the company through its difficult times.
There are several aspects of Angels investors that start-ups can learn from, and these are as follows;
1. Not all that glitters is gold
In other words, not all good businesses will find a good investment platform. To squash, the assumption that Angel Investors look to invest in a small business that is going to be strong independent businesses and make money from it, here is an interesting fact. Angel investors only gain any money from their investment when they sell their ownership.
However, if the business does not give investors an opportunity to sell their ownership, then they will get no return. A lesson that start-ups can take from this is that if your business has the capacity to start and grow into a healthy business without outside investments, then you should probably refrain from seeking investors.
Whenever you take in any investments, you also take in the investor as part of your business. When the company’s success directly affects their profits, they will do whatever it takes to make sure they get the best out of it. So unless you really need it, steer clear of investors.
2. It is important to stand out
Angel Investors look for that special factor that differentiates you from your competition, and they want you to be able to defend it. If you don’t have that special factor, often investors will not be interested as it does not guarantee that your business will be fruitful and beneficial to them.
What Angel Investors can teach start-ups, in this case, is that you should be careful not to recognize an amazing market and not have the resources to develop it fast and grab market share before someone else does. And if they do make sure to differentiate yourself from them and offer that WOW factor distinctively.
3. There must be potential for expansion
Every good investment requires growth and growth needs scalability. Scalability is the ability of a business to increase its volume greatly without affecting the fixed costs, respectively. This is a very important aspect for start-ups to consider as well. When developing your start-up plan, you need to establish that your business is capable of expanding sometime in the future, if not, perhaps it is the wrong business for you.
4. Significant growth is expensive
Angels investors look for companies with fast growth and exit because they are the ones that present a need for investment, and they know they will potentially grow to need even more investment with justification for it. Therefore, companies that are able to grow with their own funds are pretty much useless to investors.
As a start-up, something you can learn from Angels investors is that it is not up to investors to understand and believe in your story, it’s up to you to give them something to believe and invest in.
5. Don’t sweat worthless numbers
Many Angel Investors deficit spending and high growth as compared to profits. A lot of investors seem to think that start-ups must choose either growth or profit. At the same time working with big numbers can go against you as well. Nevertheless, even though Bigger markets are everybody’s goal here, top-down market numbers can be quite annoying.
Final thoughts
Finding ors as a start-up is never easy, and even though you get rejected many times by Angel Investors, make sure that you learn something each time. Because as you have seen, there is a lot you can learn from them
Good luck
