We sent out a survey to our Seraf Compass subscribers to ask for tips and advice for first-time entrepreneurs. We wanted to share some answers we thought would be helpful!
We asked the question: “What are some red flags or warning signs that may deter you from investing in an entrepreneur?”
Amos Ben-Meir, Sand Hill Angels said:
"Weak leadership, lack of transparency, outright lying (versus exaggerating a bit), any sign that they are not committed for the long haul."
Suzanne Reade, Chicago ArchAngels Managing Partner and Chicago Poland Ventures said:
"Valuation that is too high. Overly optimistic sales and profit projections. Also, we now learned that companies founded by technical experts need co-founders with business acumen or they burn out. No ability or interest in attracting a larger team of advisors. Any untruthfulness is a big red flag. Shallow understanding of their business segment or challenges ahead. Sense that they are just telling us what they think we want to hear, and that they will do the same for the next group because they are only trying to pull in dollars."
Andrey Kostyuk, AAlchemy Ventures said:
"1. Low educability, specifically inability to hear anything that does not fit into their image of the world.
2. Acting on assumptions without trying to collect hard data.
3. Inflated forecasts not making sense.
4. Absence of convincing go-to-market strategy. "
Jeff Stoler, Founder of SideCar Angels in Boston said:
"Anything that smells of “fake it ‘til you make it”. I want unvarnished information. "
Elaine Bolle, RTP Angel Fund said:
"It is a concern if the entrepreneur does not have experience in the space. Also failure is not a red flag. Not learning from failure is. Any sign of deception or lack of transparency is a major red flag. Early stage businesses have plenty of problems and risks. Investors want to be able to understand them and work with the entrepreneur to build plans to mitigate the risks."
Mitch Tyson, Tyson Associates and CEVG said:
"If they can't explain what factors were critical in success and failure. "
Nic Lenz, Independent Angel Investor said:
"I want to see them learning from failure. If a founder has had a "smooth ride" and this is their first start up, I'm cautious. Inability to "sell" the vision with conviction. Insufficient in-depth knowledge of the sector they operate in."
We hope these answers can help entrepreneurs on their investing journey. Subscribe to the Seraf Compass and keep an eye out for more surveys if you would like to share your wisdom with us!
