Angel Investing: Red Flags To Look For

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Angel investing is a risky field. But there are some red flags that any angel investor should avoid to keep themselves secure. Here are 9 red flags that any angel investors should consider before investing in a startup. 

9 Red Flags in Angel Investing

Flattery approach 

Flattery is itself a big red flag.  

If a founder appreciates you like there is no tomorrow, pass it up. Flattery is not a quality of entrepreneurs. They approach with confidence.

 

Bet For the Person, Not Idea

Ideas could be super fantastic. And, if you’re drooling just over the idea, it’s a red flag. Remember, initially, a business depends on its founder and abilities. An eligible person can turn a bad idea into profit, but an ineligible founder can drown the best idea in the loss. 

 

Confusing Website

A startup’s website should be the mirror of its business. If you felt confused and did not get an idea of the company’s business, most probably, customers will also feel the same. With confusion, no one can reach anywhere. So, a confusing website is another red flag. Thus, deny the funding for your safety and transfer them towards startup business consultant services so that they will come with the best next time. 

 

Lack of Domain Expertise 

Getting ideas is not a big task. The ability to execute the planning with the right expertise makes the difference. So, investing in a person who lacks domain knowledge or who doesn’t know what exactly are the possibilities for the future, what has been done before, and what can they do uniquely, then it’s a huge red flag. 

 

Illogical Pitch Deck & Business Plan 

These 2 elements are the most crucial elements for a startup. If the pitch deck and business plan are not up to the limit, it’s again a red flag. A business plan shows the possibilities of the company’s future, and if that’s illogical, you can’t expect anything. Thus, make sure to have a meeting with startup business consulting services to understand these aspects clearly. 

 

‘No Competition’ Phrase Usage 

Many times, startup founders say this no-competition phrase. But in this modern era, can you imagine a competition-free domain? No, right. So, if a person is saying that they have no competition, back off because the person doesn’t even research the market correctly. Ask them to have a look at stats before jumping into the market. 

 

Legal Issues

Startups, who are violating the legal norms, are not starters. To stay in the game for the long term, a startup must follow all the legal standards. 

 

Out of Scope Investment 

Just because you know the founder, don’t fall for the urge to invest if the domain is out of your scope. Investing out of your scope can cost you a massive amount with no possible returns and knowledge. Instead, you can help the founder by connecting him with the right startup consulting firms in India to get the best with safety. 

 

Hindrance To Advice

Being an entrepreneur gives a bit of arrogance, and it’s normal. But if the founder is entirely closed for outside suggestions, back off from investing. Such founders ignore the crucial advice of startup consulting firms too. They try to be a boss instead of a leader. 

 

Wrapping Up

Concludingly, we can say that investing in a startup should wholly revolve around the founder of the startup. Because in the end, the business will be in the hands of the founder. 

At Lakhani Financial Services, we bridge the gap between angel investors and startup founders. We ensure the right collaboration of eligible founders with the right angel investors. With the best startup business consulting services, we aim to get the highest possible funding for your startup.

About the Author

Devansh Lakhani

Devansh Lakhani, the director of Lakhani Financial Services, clasps a rich experience of 5+ years in the finance industry. A Chartered Accountant by qualification, Devansh has expertly handled funds for HNI clients, been part of an IPO on SME platform to tune Rs. 10+ crores, conducted the right issues to tune Rs. 10+ crores, and accomplished block deals of Rs. 35+ crores in the past. Now, with a zeal to boost startups, Devansh's heart and soul lies in Lakhani Financial Services. To date, LFS has helped 85+ startups with advisory, business plan & pitch deck preparation. Devansh is one of the most respected people when we talk about startup funding, advising, and mentoring. With the support of Devansh, 6 startups raise funds to the tune of 4+ crores. He aspires and is on the mission to boost and scale 1000+ startups in the next 5 years.

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