Something to the effect of 80% of Angel invested businesses go under, and when looking at angel investor activity from those individuals who have been actively investing in the industry the rate drops to approximately 60%. meaning, 2/3 investments will fail even under the guidance of experienced investors, and 4/5 as a whole. Quite the number.
Every single investment requires the following three things to be in place, if any of these are missing chances are that the investment will fail. These three things are.
1. A great business idea
2. A great management team
3. A great mentor
If any of these three factors is lacking, chances are that the business is unlikely to succeed, and an established angel investor would be wise to keep their money in their pocket until the sartuppers manage to make any one of the weakened factors rock solid.
Mind you this type of feedback will only come from good angels, as they will have the ample experience necessary to critique and analyze the idea. A new Business Angel may become influenced by the energy of a new entrepreneur who wholeheartedly believes in his / her idea, and like others in the general vicinity of the BA too becomes enamored with the idea.
As an entrepreneur yourself, you have to look at the BA’s you’re pitching too and working with, and seeing if they see you and your business objectively or if they’re just another member of the crowd jumping on the bandwagon. Mind you as an entrepreneur this is a very difficult task, as you’re probably thinking your primary goal is securing capital to help in delivering your business to the next level, and while in part that’s true, the greater picture is that as an entrepreneur, you should be more concerned with ensuring the success of your enterprise – rather than running after the first buck.
Oftentimes, BA’s will also say that that they would rather back a good team rather than a good idea, this is preposterous – any good team will only go so far with a mediocre idea and never provide the 30x returns that any BA should be looking for, these are not the risk takes that will back the next big thing, and if you’re idea is truly cutting edge, you’re chances with these folks are slim.
The good and successful BA, will remain cool, and over a period of weeks maybe a month to three decide if the proposal is right, it’s the right business idea, the right management team, and has the right mentors to see it grow, the business angel, will also know the market and understand the current business environment.
Ensuring your BA holds all these characteristics chances are you’ll wind up in the 44% of well thought out investments that actually make it, and when dealing with BA’s, it’s like anyone else, a give and take relationship.