I’d like to start by pointing out that while there is a huge distinction between the types of investments that Angel Investors, Seed Investors and Venture Capitalists make, this kind of advice should be a good rule of thumb across the board.
- Lack of domain expertise – Anyone can have an idea, but if the person you’re considering has no clue about what’s possible, what’s been done before, or even a tangentially related background – that’s a huge red flag.
- Lack of Coachability – there’s a certain amount of arrogance expected in an entrepreneur (they need to beat down their competition), but if they aren’t willing to consider outside advice or suggestions, stay away.
- Terrible Idea – I shouldn’t need to say this, but the majority of ideas are actually just bad, really, really bad. Yes, you are investing in the human, but that doesn’t mean you should throw money at a bad idea in the hopes that something they come up with later might be good.
- “No Competition” – This is like one of those logic puzzles. Every time I hear someone say “we have no competition” it immediately is a red flag, for two reasons. One, it’s a sign they haven’t done their research, because there’s always competition, or at least something comparable. Two, it’s a sign they might be naive enough to actually think it’s true. Either way it’s a sign to stay away.
This is by no means comprehensive, but it should give you a good start!
Originally Posted: https://www.quora.com/What-are-some-red-flags-for-people-new-to-angel-investing-when-evaluating-companies
Originally Posted On: 2017-03-11