As an entrepreneur who has worked and raised funds with and from several angel investors, I have had a vast amount of experience in meeting various types of investors. Each angel is unique with different motivations for investing and different expectations from you, as an entrepreneur. By learning about the different kinds of investors, you will able to better understand their rationale and meet their expectations. That being said, there is one common factor among all angel investors: their money is theirs. This may seem like an obvious fact, but people often forget the value of someone else’s money since it is easier to spend. Simply put, with every expense, think twice because it is not your money.
This first type of investor is not your usual, run-of-the-mill investor. This is a close family member who is being supportive of your dreams and ideas. This person has based their investment, solely on trust. They have absolute surety in your start-up and want to see you succeed. They are usually the first people to write you a check, out of the goodness of their hearts. Never exploit their kindness because without trust, a relationship, especially that of family, will falter.
As the name suggests, this investor is someone you have previously worked with or a friend from your business circles. If they are not in the same field, they may not understand what your company is into but they will support you because they have worked with you in the past. Their understanding of the corporate world will be very useful because they will be able to help you in various aspects like hiring and other important decisions. Even if you have problems with your start-up, they will stand by you if they know of your work ethic.
This type of investor is someone who knows the field you’re in and finds your project to be interesting. They understand how the industry functions and have tons of experience in what you’re working on. These investors are great allies to have because they will open way more doors than you have dreamt of. But, remember that you have to convince this investor of the capabilities of you and your team. Since they know exactly what you’re up against, you have to be worth their time, experience and money.
This is someone who invests in your idea based on their friend or colleague’s relationship with you. They implicitly trust their friend/family member who has bought them the opportunity. It is most likely that they have a relationship with one of the above investor types and are trusting their judgement on the viability of your start-up. The weight of their expectations are indirectly on you but doubly so, because it carries your friend’s reputation as well. Always keep this in mind while making decisions.
This type of investor is at the top of the pyramid. This is someone with eons of experience who has had a variety of past successes. They have experience in building successful companies and have a wide network of other investors who will also be interested in your start-up once the expert is in. They are true experts in the field and can prove to be excellent guides/mentors in the running of your business.
All investors want you to succeed, obviously. They have invested their time and money into your venture and thus, they deserve your utmost honesty. Lay all your cards on the table so that they know fully well what they’re getting into. No one likes a nasty surprise. If your product doesn’t fit the market yet, be sure to have a plan on making sure it does and work towards it. If there’s a stinky fish in your plans, you can be sure it will found out. Sooner rather than later, lies are found out and then where will you be?
Once you lose the trust of your angel investors, you have lost the trust of them all as word of a liar in the business spreads quickly. It is your duty as an entrepreneur to tell them the truth, most importantly because it is their money but also because if you do well by them, then they will also do well by others. They will be able to trust the people they invest in, after you. As a part of the community, it is your duty to keep the entrepreneurial eco-system, clean and free of filth.
Remember, “What goes around, comes around.”
Rajh is a serial entrepreneur with ventures in knowledge process outsourcing, hospitality, retail, IT and e-commerce. He has over 25 years of corporate experience and expertise in key roles of leadership, strategy, planning & management. Rajh is especially skilled at developing new profit centers within scheduled timelines and costs while ensuring operational efficiencies through long-term strategic planning. His core expertise includes delivering customized and cost-effective solutions to meet the operational and financial goals of the organization and its stakeholders. Rajh holds an MBA in Marketing from the University of Mumbai.