The Sad Disconnect Between Early-Stage Investors and the Startup Businesses

There is an unfortunate fundamental disconnect between most of the Angels / VCs and the startup businesses they are investing in.

The core business model of most Angels and also some of the earlier stage VCs is to take a short-term view on their investments. Most are banking on striking a few good deals to earn break-even and an exceptional one or two to really hit the home-run.

Let’s be clear; the blame isn’t on the Angels and VCs as we are talking about high risk investments and this is the nature of the game, however it is bad news for the majority of the funded businesses that fail, along with their founder(s). Founders are left crippled and some scarred for life. Failure is expensive and it most certainly is not limited to the financial aspects; a huge emotional and character challenge also takes place at the same time. The investors can cope as they factor this in as part of their investment strategy and business model. What about the founder(s) that put their life and soul into their failed business, diving in full-heartedly with the belief that their idea will succeed? An even more gloomy perspective in hindsight would be what if they had taken a different and more right-fit Angel / VC on-board; perhaps things could have worked out?

An important part of the equation is to find the right-fit Angels and VCs. The definition of right-fit is admittedly broad and will depend on context, however as with all things it is most probably not the first one to say yes to your pitch and offer to give you capital. They should be knowledgeable in the field or industry your startup is in, provide beneficial insights to certain aspects of your business and assist to strengthen your business on many aspects. Above all else, they should give you tailored and specific assistance to ensure your startup has an optimal chance of success; every business is unique and one formula does not fit all. If the investors or VCs tell you otherwise, they may not be telling you the truth. Companies can choose their partners, investors can pick businesses they want to invest in, so why shouldn’t your startup pick which investor(s) are right-fit?

Another unique skill that very few entrepreneurs possess is to acknowledge when a startup business or idea will not work and to either stop or pivot. There is an extremely fine line between perseverance and being overly attached ignoring all signals pointing to failure.

Learn to read the signs and trends. Use perseverance where required, find your right-fit Angels / VCs and be a savvy entrepreneur!