In Startup ecosystem, Investors and Entrepreneurs are interdependent on each other for their successes but there are always heroes and villains out there in the world and if you know how to find the mask everybody wears you will get success in whatever you do.There are many investors who want to bring change in economy and want to give back to society and want to genuinely help others but The term ‘Angel’ in Angel investor may not be always meaning it, things can take very ugly turn if you are not choosing your investor wisely.
Type 1: Gets easily irritated or annoyned and are finding some loophole to take you to Court. Instead of helping you grow as an entrepreneur they try to make money through lawsuits and intimidation. They know your situation in and out and will take complete advantage of it. Investors who are inexperienced in investing in startup companies are the most likely to complain to securities regulators or sue if they’re not happy.
Type 2:Egoistic and superiority complex guys. Will try to over power you in all the decisions you make. These people don’t add much value to your company and have to their credit only the Brand name they endorse. They will deliver worst advice with at-most confidence beware 😉
Type 3: Acts like your new Best friend and show his real face only in difficult times. They will Find some pothole in your agreement and take operating control of the company or more stake in the company. -They appear very interested in the company but their intentional motive will be to get rid of the founders and take over the company.
Types 4: Dumb ones! Hint -They ask superficial questions! have no knowledge about the operations of the company but will try to poke their heads. Wealth does not always equals to business savvy. But these people may have some smart investor friends.
Type 5: They love Red tape-ism. Unless you have lot of time and patience you must stay away from these kinds. They hold your hands at every step and want to think on the matter before going ahead with any decisions and may cause huge delay in the operations of the company. They will have lot of meetings, ask a thousand of questions, but never come close to closing a deal.
Type 1: Emotion matters to them. They work one-one with the person rather than the company and are more interested in the people aspect of investing. They are in search of people who are like them. i.e., Trust-able. They will do their best to help an entrepreneur grow personally and professionally.
Type 2: Highly energetic and intelligent. Talk straight and get to the point faster. Don’t mind to go to any extreme to help the company. The Do’er. Excellent at strategic operations. They may even take a full time active investor role in your company. Suits a lazy entrepreneur.
Type 3: Bring the whole herd of investors and mentors to you. A highly connected person. They take a satisfaction in finding a great deal and enjoy being the first one into it and bring lot others to invest in the same idea. These investors may be running their own company or a CEO at a public limited company due to which they have all the industry connections. They may not have much time for you though.
Type 4: They just want bottom-line/returns and gives you complete freedom of operations and may connect you with other mentors. Usually they prefer lower risk and lower return investments and so co-invest with other big players to ensure safe returns. If you dont need strategic advice, these types are the best.
Type 5: Take the stage/limelight types. IF you are a geek type and are apprehensive of taking the front seat in your company these people take a very active role in leadership and in marketing your product. Some one has to run the show 🙂
How to Identify Good Angel Investors
- Firstly identify your core belief system and only then you will be able to figure out what type of angel investor is best suited for you. Your should be more compatible with your investors than your life partner.
- Talk to people who have dealt with these investors and ask for their reference and get complete information about how useful they were to previous companies.
- Very important – Make your lawyer (not investor) write the legal documents and finalize the term sheet. No last minute clause’s should be allowed without in-depth legal knowledge on it.
- Finally even if it takes a heck a lot of time, do your own due diligence on your investors.