Investing in startups sometimes feels like hunting for ghosts – elusive and mysterious! And nobody likes to be left in the dark. But sometimes, investors find themselves on the receiving end of an unexpected and disappointing phenomenon: being ‘ghosted’ by a startup.
Being “ghosted” is the experience of being left in the dark with little to no communication or updates from the other party. As an investor, you could be ghosted by a startup in which you’ve invested your time, money, and trust as an angel investor. Or you could be a startup that has built a great relationship with potential – and suddenly, you are still waiting to hear back. It’s like being ghosted in a personal connection—suddenly and inexplicably cut off without warning or explanation.
This experience can be intensely frustrating, especially for individuals who believe in the vision and potential of the startup they’ve supported. You may have also built a relationship with the founder, acting as an advisor or mentor.
There are several reasons why investors might find themselves in this situation. It could be due to mismanagement within the startup, changing business priorities, financial struggles, or simply a lack of experience handling investor relations.
So, as an angel investor, what can you do when being ghosted by a prospective investee company?
- Transparent Communication: Establishing clear communication channels and expectations from the beginning can help mitigate the risk of being ‘ghosted.’ Lay our communication expectations and communication preferences clearly.
- Due Diligence and Ongoing Monitoring: Thorough due diligence before investing and continued monitoring after the investment is critical to making an informed decision.
- Engage and Seek Clarification: If the lack of communication persists, investors should take the initiative to reach out to the startup. Seeking clarification on the status, challenges, or delays reignite the communication channels.
- Legal Recourse: In extreme cases, legal action might be necessary. However, this can be a lengthy, costly process and might only sometimes result in a favorable outcome.
- Learn and Move Forward: Every investment, whether successful or not, can be a learning experience. Reflect on the situation, learn from the mistakes, and use this experience to make more informed decisions in the future.
While the experience of being ‘ghosted’ can be a painful one, it can also be a silver lining of sorts. Coachability and a strong founding team are often cited as “green flags” for angel investors. Before getting into a long-term investment, you must be comfortable with the founder(s) and their communication style.
Maintaining transparent and clear communications and proper due diligence is vital for startups and investors to foster trust and build successful, mutually beneficial relationships.
While one bad experience can leave you feeling haunted, it can also equip investors with valuable insights to navigate future investment opportunities with more caution and wisdom.
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