Companies pivot. Markets shift. Founders split up

By Armando Biondi via   Article

What Angel Investors are Actually Buying From Your Startup

“If angel investors were actually buying your company, they would be much more interested in its outcome. But they aren’t.

Sure, angel investors are taking a small option to buy future shares at a discount price–particularly since the vast majority of funding rounds nowadays are made through a convertible note–but in their eyes that’s just a byproduct; a consequence.

From an angel investor standpoint, you’re now competing with hundreds–if not thousands–of other startups. Every single one of them are valued between $3 million and $6 million–and in more rare cases, up to $8 million. Every. Single. One. …

So this is how they make their purchase decision, but what are they actually buying from you? Not your company . . . but rather access to privileged information. Think about it for a second–that’s why investors don’t care if you fail, but get pissed off if you don’t share what’s happening. It’s fine to screw up, but it’s not okay to hide it. Does this ring a bell? Here’s why.

Regardless of what the average investor may tell you, the reality is no one can predict who or what will become successful. Companies pivot. Markets shift. Founders split up. In short: shit happens. …

Even if investors have known you and your startup for a while, they still have an issue–it’s very hard to see how a company is performing from the outside. A majority of founders don’t disclose monthly key metrics and their performance in time–if not from a very high-level standpoint. It’s like peering through the keyhole. Sure, they get a glimpse of what’s going on, but they cannot picture the whole story. And that’s a huge issue, because having access to information before others means being able to put more money at lower valuations. That’s a win.”


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