As an entrepreneur, finding the right investors is essential to the success of your business. The wrong investors can turn a good opportunity into a nightmare, a failure, or both. So how do you avoid making this mistake and find the right investors for your startup?

There isn’t a one-size-fits-all solution for startups, but there are a few key things to bear in mind while seeking investors.

We’ll dig into what to look for in an ideal investor and how you can troll the bad ones on social media.

Tips To Avoid The Wrong Investors

There’s a plethora of reasons why a startup might fail, but one of the biggest is choosing the wrong investors.

Investors can make or break a startup. The right ones will provide funding, mentorship, and industry connections when needed, while bad investors will meddle, blow you off, and lack empathy for the difficulties of running a business.

So how do you find the right investors for your startup? Here are a few tips.

How To Avoid The Wrong Investors

Before you start pitching to investors, it’s important to have a clear idea of what you’re looking for.

Here are 5 questions you should ask yourself:

1. How much money do you need to raise?

The money you need will dictate the type of investors you’re looking for. For example, if you’re looking to raise a large sum of money, you’ll need to look for institutional investors or venture capitalists.

2. What kind of advice and support do you want from your investors?

Do you want an investor who will take an active role in your startup or someone who will take a hands-off approach?

3. What is your ideal relationship with your investors?

Do you want to maintain full control of your startup or are you open to giving up some equity in exchange for the right investment?

4. Do you have a solid business plan and team in place?

Investors are more likely to invest in a startup that has a clear plan and a strong team in place. If you’re still in the early stages of your startup, it might be worth waiting until you have these things before seeking investment.

5. Why do you need an investor?

It’s important to be clear about why you’re seeking investment. Is it to help you get your business off the ground or to help you scale? Knowing this will help you identify the right investors for your startup.

Once you’ve answered these questions, you’ll have a better idea of what type of investor is right for your startup.

How To Avoid The Wrong Investors

There’s no shortage of investors out there, but not all of them are right for your startup. It’s important to take the time to find good investors who will be honest, available, and supportive.

Here are a few key things to keep in mind while seeking investors:

Look at the investor’s track record

One of the best ways to gauge whether an investor is right for your startup is to look at their track record. Do they have a history of investing in startups similar to yours? Have they been successful in the past?

In today’s digital age, it’s easy to find an investment firm’s track record with a simple Google search. If their startup investments don’t look good, then AVOID them. Avoid it like the plague.

Understand their investment strategy

It’s also important to understand an investor’s investment strategy. What kind of companies do they invest in? How much money do they typically invest? What stage of the company do they invest in?

Look for red flags

When you’re talking to potential investors, be on the lookout for red flags. Here are a few red flags to look for:

They’re more interested in the money than the product

Investors should be interested in your product or service, not just the potential return on investment. If an investor seems more focused on the money, they’re probably not right for your startup.

They’re not available – Good investors will make themselves available to their portfolio companies. If an investor is difficult to get ahold of, it could be a sign that they’re not as interested in your company as they should be.
They’re constantly interrupting you – If an investor is constantly interrupting you, it’s a sign that they’re not really listening to what you’re saying. This is a major red flag and should be a dealbreaker.
They’re not supportive – Good investors will be supportive of their portfolio companies. If an investor is constantly negative or critical, they’re probably not right for your startup.
They’re not responsive – If an investor is slow to respond to your emails or calls, it could be a sign that they’re not as interested in your company as they should be.

If an investor has a lot of red flags, it’s best to avoid them. Trust your gut instinct – if something doesn’t feel right, it probably isn’t.

Look for investors who align with your values

It’s also important to find investors who share your values. This can help you avoid conflicts down the road. Here are some values to look for in an investor:

Empathy – The ability to understand and share the feelings of another.
Deferring to the team – Allowing the startup team to make decisions without interference.
Providing targeted guidance – Giving advice that is specific and helpful.
Tolerating bumps – Being understanding when things don’t go as planned.
Working to earn trust – Building a relationship of mutual trust and respect.

Keep in mind your goals for the investment

Before you take on any investor, it’s important to be clear about your goals for the investment. Do you want to maintain full control of your startup or are you open to giving up some equity? What are you looking to get out of the investment?

Investors can sniff out entrepreneurs who are just looking for a quick payday. Be clear about your goals and make sure they align with the investor’s goals.

Be clear about what you’re looking for

Before you start pitching your business, be clear about what you want from an investor. Do you want a hands-on or hands-off approach? How much control are you willing to give up? What kind of advice and support are you looking for?

If you cannot answer these questions, you are not ready to start seeking investment.

Hang out with them, get to know them

Investors are people too, so it’s important to get to know them on a personal level. See if you have any common interests or connections. This can help you gauge whether they’re someone you want to work with.

And, many times, their true colors will show eventually. Here are a few questions you should be able to answer affirmatively before taking someone’s money:

Can I see myself having a beer with this person?
Do they have my back?
Do they give good advice?
Do I trust them?

If the answer is no to any of these, walk away.

Troll them on social media

Finally, don’t forget to troll your potential investors on social media. Yup, you read that right. This is actually a great way to get an idea of what they’re really like. Check out their Twitter, TikTok, LinkedIn, Facebook, BeReal, Snap, and Instagram to see what they’re posting about. Do they seem like someone you can trust?

Follow them, like their posts, and see what kind of person they really are. And, if you’re feeling brave, you can even slide into their DMs.

If investors don’t have a social media presence, that’s a major red flag. In today’s day and age, it’s essential for investors to be active on social media. This is how they build relationships and connect with entrepreneurs.

We cannot stress this enough – do your due diligence before taking any money from investors. It’s not worth it, in the long run, to take money from the wrong people.

How To Find The Right Investors For Your Startup

There are a number of ways to find investors for your startup, but not all of them will be right for your business.

Some common ways to find investors include:

Attending startup events

Network and meet potential investors at startup events. This is a great way to get your foot in the door and pitch your business to a number of different investors.

Asking for referrals

If you have friends or family who know any investors, ask for referrals. This can be a great way to get introduced to investors who might be interested in your business. Referrals are by far the best way to meet new investors.

Applying to accelerators

There are many accelerators out there that can help you find investors for your startup. This is a great option if you’re just starting out and need some help getting your business off the ground. YCombinator, for example, is one of the most well-known accelerators and has helped many startups find investors.

Researching online

Another way to find investors is to research them online. Look for investors who have invested in startups similar to yours. You can also use online platforms like AngelList to find and connect with investors. FYI – this is the least of our favorite ways to find investors.

Once you’ve found some potential investors, it’s time to start pitching your business.

The Bottom Line

Finding a unicorn investor is hard, but it’s worth it to take the time to find someone who shares your values and is supportive of your startup. Be clear about your goals for the investment and don’t forget to troll them on social media.

Remember, take your time, do your research, and trust your gut. And, most importantly, don’t give up control of your company without knowing what you’re getting yourself into.

Lastly, avoid taking money from family and friends if you can. This rarely ends well.