If your small business functions just like any other business out there, you may be seeking out angel investments. Looking at a number of high profile success stories such as Facebook, Twitter, Uber, and even WhatsApp many hold the misconception that Angel Investing may provide some glorious revitalization to their company. While this may have some truth to it depending on your business, more often than not, angel investing typically sees less benefits for your business than not being invested in at all.
One main reason to avoid angel investing is because angel investors care very little about your goals as a small business owner. Angel investors have a very limited scope in terms of the items they prioritize. Things such as the items your selling, a viable business plan, and the business capability in making profits are all front and center in an angel investors mind. As a small business owner who is passionate and puts essentially their life into their business, having such an individual assisting in administration of your enterprise is not ideal.
Another reason to avoid angel investing as a small business owner is because you lose a significant amount of control over your company. Angel Investors are typically people who come from a significant amount of wealth or even former business people who believe they know how to run your business better than you do. With this mindset, the angel investor will usually seek to come in control of between 10 to 50 percent of your business, thus limiting the amount of say and control you have of your business. Seeing as though most Angel investors have some experience within business they usually try to set an end goal that is usually in terms of profits, sales, users, etc. which can be detrimental to the focus of your small business. Also keep in mind that if you are seen as an obstacle to this end goal the investor could oust you from your own enterprise.
Being a small business owner is already rough with a number of various commitments and time investments, but if you desire to have an angel investor invest in your company you have to set up a pitch which in itself is another ordeal. No matter how well you try to perfect your business or investor pitch, obtaining an investment could take months, or sometimes even years. For most business owners, they will be unsuccessful in their pitch. Regardless of how determined an entrepreneur you are, constantly receiving rejections can demoralize one’s ambition. I would advise you to better spend your energy growing your startup.
As mentioned prior, investors will often times try to take advantage of a small business by attempting to attain control as much of the business as they can. The more of the company they own, the more profits they receive when they come around. The old saying your dad tried to teach you that 50% of something is better than 100% of nothing holds only if it is impossible to start and grow your business without any outside investment. Investment that is taken when it’s not really needed, is simply a temporary booster, and down the line is replaced by pain and suffering.
Finally, as a small business owner, one must understand that having an angel investor does not necessarily represent success and everlasting profits to come for your company. In one popular case, a company named Color was a high profile start up that received attention from many big time angel investors. You would think that an enterprise receiving attention at that kind of level would become successful and land a record number of profits, but in the end the company eventually failed, which goes to show that no much money or how many angel investors you have for your small business, the chance to fail still lurks.
In conclusion, one can see that small business owners have a lot to risk by pitching to angel investors. Things like lost time and energy, lack of company control, and loss of business focus are some major consequences that may arise from pitching to Angel investors.
About: Dr. Roshawnna Novellus, known as the Wealthy Yogi, is a mindful wealth multiplier, business strategist, and author Budgeting is More Liberation than Limitation. She has developed a 5-step blueprint for mindful money management to show any entrepreneur how to create a stress free wealthy lifestyle. Through her books, programs and retreats, she has helped thousands of entrepreneurs achieve intentional personal success.
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