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5 Good Reasons Not to Seek Angel Investment

Assume you have the right factors to get angel investment: experienced team, good product-market fit, growth potential, defensibility, and a reasonable shot at a successful exit. Have you asked yourself whether that’s what you really want? Have you considered the tradeoffs?

This might seem awkward on this site, suggesting that you don’t want angel investment. That’s what we’re here for. But angel investment isn’t for everybody. My own experience keeps me open minded on this point. I’m an angel investor now, but I also had a small piece of co-founder equity in a software company that went public, and whole ownership of a software company that grew and prospered but remained private. I made more money, and had way more satisfaction, from the latter.

So then, why not angel investment? Here are a few reasons I can think of – aside from just not having a deal that angels want to invest in:

1. You can make it without it. I like to think the nature of the deal itself, the business you’re working on, carries with it a need for getting outside investment related to the sweet spot of the opportunity. Take for example a critical mass business that has to grow fast and will never make it if it doesn’t; that’s a business that needs investment. But what if that isn’t you, or your business? What if you have a strong position in an interesting niche, and you can fund your growth with sales and prepayments, so you don’t need outside money? In that case, you should think about whether or not you want to share ownership, and decision power, with outsiders. Maybe you don’t.

2. You’re not very good at sharing. Don’t be embarrassed; you’re not the only one. Maybe you don’t like having to discuss key decisions with your board of directors. Maybe you trust your own instinct and don’t like having to compromise. I remember deciding on my own that I wasn’t going to abandon the Mac market as Windows swept it away, and enjoying the fact that I didn’t have to convince anybody except my wife, who is also my co-owner, and who happened to agree with me. It was not a great business decision, at that time (2000); but it was what I wanted and it felt good. Investors are owners, and owners are bosses. That goes for co-owners too.

3. Just getting financed doesn’t mean diddly. Having a few hundred thousand dollars doesn’t mean you can’t fail. In fact, once you’ve landed investment, you’ve upped the stakes, and made failure more visible, and less within your own control. Don’t tell investors you’ve decided to scale down or focus more narrowly on a niche in which you’re cash flow independent; that sounds to me like no positive exit for the investors. Having investment makes you visible, in a spotlight. You haven’t won the race when you get that check.

4. Investment increases risk. It’s like driving a van with passengers instead of driving your own car alone. The penalties for failure are higher because those other people, and their money, are involved. There are some lower risk options, like cutting down and focusing narrowly, that may no longer be available. And you’re no longer as free to pivot, redefine, and edit your own story.

5. Investors aren’t generic. Some help, and some don’t. Some are raging self absorbed narrow-minded critics. The idea of angel investment is a lot like the idea of marriage – it depends a whole lot on with whom.

Written by Tim Berry

user Tim Berry

Tim is the founder of Palo Alto Software and, the co-founder of Borland International, and the official business planning coach at He has been called the "Obi-wan Kenobe of business planning" and "The Father of Business Planning." He is a serial author of books and software on business planning.

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3 thoughts on “5 Good Reasons Not to Seek Angel Investment”

  1. Micklentas says:

    good honest stuff Tim. Thats exactly what I needed to clarify. Right now.

  2. Lill Gentry says:

    Good to hear this point of view.