Angel Investor Funding: Sometimes a Bad Idea?

Angel investor funding (venture capital, or private forbusiness in general or your particular industry but
that matter) for your business is a bad ideathey have the controlling vote, your business could
sometimes. Yes you read that correctly. For all yoube in danger. They will be able to force the company
discouraged entrepreneurs that have been makingin a direction that you (despite being the
presentation after presentation barely making endsentrepreneur who came up with the idea, began its
meet, take heart. You have options. And not only doimplementation, and sacrificed so much for) are
you have options, some of them are better for yourcompletely opposed to. Not only that, but most
business.entrepreneurs taking venture capital end up with less
There are several reasons that taking on an angelthan 10% ownership after all financing rounds are
investor can be bad for business. First, without angelover, so negotiate wisely with that in mind.
investor funding you are forced to think of newYou may think 10% of $10 million after five years
ways to get ideas implemented on as little a budgetwouldn’t be so bad. But consider how much you
as possible, and sometimes even smaller than that.personally invested in both time and money and the
So the lack of angel investor funding drivesreality that the vast majority of businesses fail within
innovation or forces an entrepreneur to quit. Thefive years, and very few of the successful
great part of this money shortage is that you havebusinesses are valued at $10 million in that time. With
the privilege right away of seeing whether yourall of this in perspective, taking on an investor can
business will get a competitive edge through your skillseem like a different story.
in organizing and innovating. Many if not mostYou should also consider the debt to equity balance
successful startups relied heavily on scraping by on ain your personal finances as well as those of the
shoestring budget and thinking of new ways tobusiness, if they are intricately linked. The rule of
achieve their goals cheaper until the funding startedthumb is that if you have lots of debt financing
coming. Sometimes you might even come up withalready, give away equity in your company. But if
alternates or extensions of your initial core idea thatyou already have done some equity financing, it
are better anyway.might be a better idea to search for a loan. Most
Another reason taking angel investor funding canentrepreneurs will be able to get a small unsecured
harm a company is the amount of influence andloan, help from family and friends, or use credit cards
returns some investors require. Unscrupulousto get that first $25-50,000 out of the way. If you
investors may offer desperately-needed angelhave good credit, you may be able to get a loan for
investor funding in exchange for the majority ofup to $1 million.
future profits through heavily disguised terms. If youTo summarize, angel investors are good if they
are a novice angel investor fundraiser, be sure toprovide valuable contacts and experience along with
seek the advice of your attorney and possibly antheir angel investor funding to your business. But
experienced entrepreneur. But even the honestrealize that many businesses have started and
investors (and really, all the best ones) will want aoperated initially without them by using loans, family,
significant voice in the direction of your company,or credit, so pursue new ideas and financing options
because they want to ensure their “angelwhile relentlessly working on improving your business.
investor funding” is not thrown to the wind. IfYou can be successful without it!
they are not particularly knowledgeable about