When angels become devils – when things go south

Over the next few weeks we will be giving you the lowdown on angel investors: how to find them, how best to pitch and what they are looking for in your startup to help you determine if seeking angel investment for your startup is the best way to go.

We have covered everything from what a startup needs to do to find an angel investor to how you can make the most out of forging a relationship with an angel investor. And this week we discuss what to do when things go wrong in your relationship with an angel investor.

It’s the same as any business relationship – or a marriage – with there being a chance what looks set to be a match made in heaven, falls quickly towards hell. Here’s some things to look out for when choosing an investor and as you start out on your relationship together, as well as some tips to prevent it causing too much damage.

Devil investor 1: Overly critical and impatient

So you’ve received your investment and you’re making the changes and investing the funds in the way discussed during your pitch. But then things don’t progress or develop quite as quickly as expected and suddenly the angel wants to have further oversight and more regular updates. This can set off a vicious cycle where the CEO loses confidence due to the additional monitoring meaning they struggle to make decisions and lose creativity, which in turn instills further doubt into the investor, until confidence is lost on both sides. 

The best way to remedy this is to avoid it happening in the first place – communication is key. When starting out, agree on the regularity of updates and check ins, encouraging positive discourse. Try to keep critiques to the work, and be open to two way dialogue and feedback.

Devil investor 2: The micro manager

Many angel investors have had experience of running their own companies successfully and bring with them a huge swathe of expertise. Working with angels can be a fantastic opportunity to seek advice and use their experience to help you come to decisions or review your options. However, if they think the way they finalised that deal back in 2001 is the only way to go and they won’t see or hear other options, you’re in for a struggle. Startups succeed by disrupting the status quo so you won’t get too far if you cave on their suggestions and go back to old ways. 

A way to get round this is by utilising other advice received so it isn’t seen you’re ignoring everything they suggest in order to maintain a positive relationship.

Devil investor 3: The pedant 

Although it’s good to have someone who is detail-orientated in some aspects of business, if your investor demands to call a meeting every time a tiny decision needs to be made and struggles to make a decision, you’re in for a backwards journey down a hill.

Agree when you start out on the decision making process – although an angel may want some say in bigger issues, if you agree early on, this can hopefully be avoided.

There is no formal education or approval angel investors need to receive in order to become an investor so as much as they are risking on your business, you are also risking going into business with them. As ever, do your homework and research each angel investor you meet to see if any alarm bells pop up and when meeting, trust your instincts about the angel, rather than simply focusing on the money and ask for references – we believe there is an angel out there for every great idea.