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An angel fund investor said it can be particularly difficult to obtain funds for growing businesses during times of economic uncertainty.
But despite the current market atmosphere, it is not impossible if you take the right steps.
“(Macro uncertainty) often means that when the stock market is not doing well, your new company may be less,” explained Sarah Kunst, an Angel Fund investor and entrepreneur, on Yahoo Finance’s financial freestyle podcast. “So, this means that venture investors like me, we don’t take back the money from these early investments because when companies get through the M&A process, we tend to recover them, which is also slower.”
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Bringing entrepreneurs can still get capital from angel investors like Kunst, but they want to make sure their business plan is Ironclad.
First, it is important for entrepreneurs to understand the growth potential of their industry. Kunster said she keeps an eye on the cybersecurity sector for potential new investments.
If the market is not enough to grow your business and make huge profits, it is difficult to get investment.
“It’s much easier to do, to be a billion dollar company in a trillion dollar space because that means you’re still a big company,” Kunster explained. “As an investor, I might invest at $2 (million) or $5 (million) or any million valuation, but I can still make a lot of money because I can see a path where you can mess up everything, run into a lot of doom and still be a billion dollar company.”
Angel investors are also looking for explanations of why you are the best person to find and run a company. Without your experience in a given field to support your ideas, it is difficult to secure investors.
Kunst said she hopes entrepreneurs can tell her about the effects of knocking, the issues being addressed and the consumer base that will be put into their ideas. Additionally, she said she hopes entrepreneurs tell her: "That's why I'm perfect for it. I've been in this space for five years."
“You usually see people having education, life experience or professional experience in the space,” she added.
Ultimately, Kunst admits that the current market conditions are not ideal for investors to sign new ideas. Due to steady market volatility, Kunster said “there is less money to deploy and invest in new companies”, which will ultimately harm entrepreneurs’ opportunities.
“There is much less money in terms of how fundraising is done compared to what happened a few years ago,” she said. “So, therefore, it certainly slows down the overall speed of most venture capitalists writing checks.”
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