Rushing your investment round can have devastating consequences: Veteran angel investor

Leading angel investor Jordan Green has called for a reality check for start-up founders seeking funding, advising against rushing into deals and prioritising speedy decisions over building sustainable relationships.

Green spoke with StartupSmart shortly after Spreets co-founder Dean McEvoy called for Australian entrepreneurs to make decisions within two weeks at an angel investor education night last month.

“You’re only option is to be fast money here in Australia, because if you can’t be the fast money you’ll miss out on the good deals which will find the smart or big money elsewhere,” McEvoy said.

Green says start-up founders should expect investment decisions with private or angel investors to take a few months.

“Investment is a relationship and you need to get it right. If it’s formed very young in the lifecycle of the business it’s going to have a significant impact on the growth and shape of the business. Rushing into anything won’t have a happy outcome,” he says.

According to Green, rushed investment processes can often lead to misunderstanding the expectations of both parties. This tension can lead to advisor and entrepreneur having conflicting opinions on where the business should focus, how rapidly it should go and what is worth investing in.

He adds the impacts of poor investment partnerships are significant.

“When there is money and company ownership involved, it can be devastating for those who have these things at stake. So it’s important entrepreneurs understand good investment process takes time,” Green says.

Entrepreneurs should expect to spend two to three months liaising with potential investors, especially those who invest in groups.

“Good investments very, very rarely happen in a couple of weeks. Two to three months is a reasonable time frame, especially for angel groups,” Green says.

He adds the timeframe might be shorter for a full time independent investor, but start-up founders should still take as much time as they need to assess their potential investors.

“Entrepreneurs should assess their investors as much as their investors assess them,” Green says. “And you probably don’t want an investor with a huge ego. Anyone who has been through a serious, successful start-up experience knows there is very little room for that kind of ego. It almost always destroys because you need a collaborative environment to build a business.”