Raising funds (money) for your startup? Great. But, before you pitch to the Angel Investors, you should first know what aspects (factors) could drive them away.
Why Angel Investors Shy Away?
Josh Payne, a serial angel investor has invested in 50+ startups and seen what works, and most importantly, what drives them away.
Based on his experience, Josh shares the 10 biggest mistakes (red flags) that can certainly derail your fundraising efforts.
1. No Real Customers
A pitch deck, a sleek website, and a grand vision might get you some polite nods, but they won’t get you funding. Investors want proof that people are willing to pay for what you’re building. Having paying customers (revenue) shows that your idea isn’t just theory - it’s something the market actually wants. Even better? Repeat customers are a sign that your product/service isn’t just being tried but valued.
If you don’t have customers yet, focus on getting some before you try raising money.
2. No Path to Profitability
You could raise $100 Mn, but if there’s no strategy to eventually turn a profit, it’s just a matter of time before the money runs out. Growth is exciting, but cash flow is not just for survival but also for growth.
Investors look for businesses that can sustain themselves in the long run. If your only plan is “raise more money,” you’re building a house of cards.
3. Founders Who Can’t Sell
Every successful founder is a salesperson - whether they realize it or not. In the early days, you’re selling to customers, to employees, to investors. If you’re avoiding sales calls, feel uncomfortable pitching your product, or hesitant about reaching out to people, that’s a red flag. If you can’t sell, you can’t grow, and your startup won’t last.
4. No Differentiation
“Like [popular company], but cheaper.”
That’s not a strategy - it’s a race to the bottom. Competing on price alone is dangerous because bigger companies can outspend you, outlast you, and ultimately crush you. Instead, focus on what makes you different. Why should someone choose you over competitors? Maybe it’s a unique feature, a better experience, or an underserved niche. If you don’t have a clear answer, you need to go back to the drawing board.
5. No Urgency
The best founders act like they’re running out of time - because they are.
If you’re “exploring ideas” or “thinking about raising next year,” you might already be too late. Investors look for founders who move fast, make decisions quickly, and execute with urgency. If you’re too slow, someone else will beat you to market.
6. Raising Money Before Proving Anything
Too many founders believe fundraising is the first step. It’s not. If your startup can’t make progress without outside money, that’s a warning sign.
Great businesses start by proving demand, building something people want, and gaining traction - without needing a huge budget. Investors don’t want to fund an experiment. They want to fund momentum.
7. No Clear Distribution Strategy
A great product isn’t enough. Many first-time founders assume that if they build something amazing, customers will just show up. That’s a myth.
The best founders think about distribution from day one.
How will you acquire users?
What’s your go-to-market strategy?
If your only plan is “we’ll figure out marketing later,” you’re already in trouble.
8. No Ownership Mentality
Early-stage startups require founders who roll up their sleeves and do the work.
If a founder says, “I need to hire someone to do that” too early, it’s a red flag. Yes, you’ll eventually need to delegate - but in the beginning, the best founders learn, adapt, and figure things out themselves before outsourcing.
Investors bet on resourceful, hands-on founders, not ones who look for shortcuts.
9. A CEO Who Can’t Attract Talent
Your first few hires are critical. They shape your company’s culture, product, and trajectory.
If talented people aren’t willing to join you, investors will wonder why. Is the vision weak? Are you failing to inspire? A great founder can rally a team even with limited resources. If you can’t convince people to work with you, why should investors trust you with their money?
10. No Skin in the Game
If you’re not personally invested, why should anyone else be?
Investors want to see commitment. If a founder isn’t willing to put their own money in, take a pay cut, or make sacrifices, it signals a lack of conviction. Founders who truly believe in their startup do whatever it takes to make it work. If you’re not all in, neither are we.
Conclusion
Fundraising isn’t just about convincing investors to write checks - it’s about proving that your business is worth investing in. The best way to raise money? Build something so compelling that investors come to you.
Avoid these red flags, focus on traction, and show that you’re a founder who makes things happen. Do that, and you won’t have to chase investors - they’ll chase you.
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