Marjorie Radlo-Zandi
Contributor
Marjorie Radlo-Zandi is an entrepreneur, board member and mentor to startups, and an angel investor who reveals early-stage companies learn how to construct and efficiently scale their companies.
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After viewing hundreds of displays and pitch decks over a few years, even probably the most skilled angel traders — and VCs — can overlook pink flags which can be delicate and never instantly obvious. I do know this from firsthand expertise: Together with many wins there are some investments I want I’d turned down. I missed the pink flags.
So that you just decrease the probability of studying the arduous manner, what follows are my prime delicate pink flags angel traders ought to heed when evaluating a possible funding. By staying vigilant and figuring out what to search for, you may make knowledgeable selections and keep away from alternatives that you just decide aren’t definitely worth the threat.
An out-of-balance crew
A key issue if you’re contemplating an funding is whether or not enterprise experience and technical know-how of the founding crew are in stability.
Even probably the most skilled angel traders and VCs can overlook pink flags that aren’t instantly obvious.
I’ve heard pitches from many life science firms with deeply credentialed and revolutionary technical founders with completely no enterprise experience on the crew. Conversely, I’ve seen firms full of many very good enterprise professionals which can be poor of their technical prowess. A founding crew should all the time have related, gifted technical experience to be viable.
And not using a fine-tuned stability of enterprise acumen and technical ingenuity, a startup could battle to develop their game-changing product, deliver it to market, scale the enterprise and entice prospects and traders.
Frequent employees turnover
Frequent and excessive turnover is usually a pink flag for traders because it normally signifies instability and inside conflicts throughout the founding crew. Turnover disrupts the corporate’s operation, tradition and development trajectory. It’s a pink flag that drama is consuming the corporate whereas its mission is generally sidelined. A revolving door exhibiting that the corporate can’t retain prime expertise will negatively impression its monetary prospects, each brief and long term.
Instability in a founding crew can present up in ego-driven abrasive administration, favoritism and unfair compensation — points and inequity that may trigger individuals to go away.
Tweaks in management are regular and wholesome as an organization grows. However when these adjustments happen too continuously, traders ought to pay specific consideration because it usually suggests deeper points within the enterprise.