Every Entrepreneur Should Be Aware Of These 5 Most Common Myths About Angel Investors
There’s a lot of chatter in the entrepreneurial sector about what to expect when you meet angel investors. The image of angel investors terrifies lots of entrepreneurs.
Many are frightened to contact angel investors with company ideas because they seem to be so enormous, powerful, and intimidating. I discovered a lot about them. In this blog, I’ll debunk the 5 most common myths regarding angel investors.
1. Angel Investors Have Complete Power
When it comes to angel investors, most people believe they have no voice or choice. They believe that if they want money, they must grant the investor’s every wish.
However, I heard from some smart entrepreneurs that you have a plethora of options. While there are millions of angel investors out there, there is only one team doing what you are doing.
2. Angel Investors Are Like Venture Capitalists
Angel investors will invest in anything from the local dry cleaners to a restaurant, but venture capitalists (VCs) prefer to focus almost entirely on high-growth industries like technology.
They prefer to work in industries with which they are familiar. Furthermore, they are significantly less hands-on than venture capitalists. The majority of angel investors spend less than an hour every week with the businesses they invest in. Only about 5% of businesses that receive angel funding go on to receive venture capital funding. (Reference- The Illusions of Entrepreneurship By Scott A. Shane)
3. Angel Investors Are Likely To Make Significant Business Decisions
Angel investors have a widespread perception that they prefer to be in charge, making all of the big business decisions. However, the reality may be quite different. Investors and founders may have a legal agreement in which the investors also become members of the advisory board of the organization. There is no norm when it comes to angel-founder relationships.
Angel investors are frequently seen as a critical component of India’s startup ecosystem. They can provide strategic advice and mentorship to up-and-coming companies in addition to financial assistance. To realize these rewards, entrepreneurs must look past the myths and understand what angel financing truly entails.
4. Angel Investors Are Wealthy And Experienced Investors
No! Only 21% of angel investors fulfill the Securities and Exchange Commission’s definition of an “accredited investor,” which is defined as an individual earning $250,000 or more yearly, or a couple earning $350,000 or more (with a net worth of more than $1 million). Furthermore, the vast majority of angel investors lose money on their investments, and just 2% of the enterprises they invest in go public. Only 15% of angel investors conduct “extensive” research on the industries in which the enterprises they fund operate. (Reference- The Illusions of Entrepreneurship By Scott A. Shane)
5. If I Make One mistake, I Won’t Be Able To Get Funding
When it comes to pitching to investors, you want to put on the finest show possible. However, a few missteps or blunders do not guarantee that you will not be funded.
Remember that most angel investors are or have been entrepreneurs, so they understand what it’s like to be on the other side of the table. They’re less concerned with your mistakes (as long as you can recover and learn from them) and more concerned with your desire to succeed.
Now It’s Time To Wrap Things Up
For many entrepreneurs, pitching to angel investors and developing relationships with them may be a nerve-wracking but thrilling experience. This blog debunks the 5 most common myths about angel investors believed by many entrepreneurs.
