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Why Investors hesitate to Invest

December 6th, 2007 · No Comments

A 2005 national survey of angel investor groups actively investing in private companies revealed that 66% of their members do not actively invest because of their lack of knowledge of the process, not because the opportunity was considered too risky.   When I heard this statistic and called the firm conducting the survey to confirm, I couldn’t believe that was the primary reason aggressive sophisticated investors didn’t invest in private companies.   So many exciting emerging growth companies struggle to find growth capital from angel investors.   On average, only 23% of the companies that qualify to be considered by angel investor groups actually receive investment.   Although, there are many factors that drive this low percentage such as valuation of the company, structure of the investment offering, and validity of the business model, this study revealed that the biggest reason an investor doesn’t invest is completely outside of the control of the entrepreneur.   The potential investors simply are uncomfortable with the process of private equity investment and their desire to participate does not supersede their fear of uncertainty.

 

I first became aware of the need for millionaires to learn about the private equity investing process when a few wealth managers and investors came to me seeking information on how to be an angel investor.    I couldn’t believe there wasn’t information readily available.    Yes, there were many books at the library or book store regarding private equity investing.   Most are oriented toward the entrepreneur or read like a text book.   I realized that very wealthy people don’t want to spend hours and hours reading theory on angel investing when they could be playing golf or spending time with their family.   They want to learn how to take their experiences and apply that to private equity investing.   I began developing the Learn to Be an Angel Investor series of e-books.  They are now available at www.kyrmedia.com

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