8 avoidable reasons that make an Angel Investor say no and how to remedy them!
Recently, I was contacted by a newly (self) minted startup entrepreneur. He wrote to me out of the blue, his concept and his geography were not of interest to me, his pitch was not informative and boring, his ability to engage was almost nonexistent, he had no financial data, he had not proven that his business concept was solving a real problem.
He hit so many of the 8 main reasons that make an investor say no, that I felt bad for him. I realized that these reasons may not be apparent to many people and therefore a simple list may prove to be a welcome refresher for many and a useful reference for most. Here they are:
- The market opportunity is too small
Remedy: show the total market size, the addressable market and the capturable market that your business concept will target. Do your homework, do not pull figures out of thin air, investors are good usually with numbers.
- The founders seem inexperienced or not too passionate about the project
Remedy: since the team is one of the most important investment criteria that an investor will evaluate, ensure that the founders have experience, authority and credibility. Do not underestimate the value of showing true passion and enthusiasm that the investors will immediately perceive.
- The sector is not of interest
Remedy: before contacting an investor, do your homework. Study their sector preferences and current holdings. Pitch a project in a sector they already invest in, or that is complementary to their current investments.
- Cold contact
Remedy: angel investors receive countless emails, messages and pitch decks. It is highly unlikely that we will spend time on an unsolicited or not properly introduced pitch. See if you can get a reference or an in person first contact.
- Unbelievable financial forecasts, lack of ability in defending the underlying assumptions
Remedy: do your best to learn your numbers, your capturable market, your competition. Test, test and test again your assumptions and your business model. Don’t use numbers that you do not fully understand and can explain and defend.
- There is no geographical affinity
Remedy: Angel Investors like to invest in areas close to their homes or that they are very familiar to them. They will invest in a company that is 5,000km away.
- You are not solving a problem or satisfying a need
Remedy: always, always, always ensure that your business proposition solves a problem or satisfies a need, apparent or emerging.
- No differentiation from your competitors
Remedy: be original, don’t propose a “me too” concept that must compete on price. Look for a winning and original concept.
In a nutshell: solve a problem, be prepared, be enthusiastic, be realistic, do your homework!
