5 Good Reasons Not to Seek Angel Investment by Tim Berry

TL;DR - Some founders might not want to seek angel investment because they can make it without it; they do not want to lose control; it makes any failure more visible and less within their own control; it increases risk; and/or some investors are not helpful.

Helpfulness - 4

Tags - outside capital, startup financing, raising capital, angel investment

Questions answered:

  • What do angel investors look for in startups?
  • What are some reasons for founders to not seek angel investment?

Summary:

  • Angel investors look for startups that have an experienced team, good product-market fit, growth potential, defensibility, and a reasonable shot at a successful exit.
  • Some reasons why founders might not want to get angel investment are:
    • 1. Some can make it without outside capital
      • e.g. if a startup has a strong position in an interesting niche and it can fund its growth with revenues, there’s no need to raise outside capital
    • 2. Some may not want to discuss key decisions with a board of directors or compromise with them
    • 3. Having investment makes any failure more visible and less within the founder’s own control.
    • 4. Investment increases risk; the penalties for failure are higher because other people and their money are involved.
    • 5. Some investors may only care about their interests (financial returns) and not about the company.