Investments made on gut instinct, say angels

Angel investors rely on their intuition ahead of financial calculations when deciding whether to invest in a business, a survey has found. Angel network Angel’s Den found that 73% of experienced business angels surveyed said they used ‘gut feel’ to value an early stage business, with human and market factors also being major considerations. Around half the investors said they based their decisions ‘to a great extent’ on the management team and whether they could work with them. Co-founder of Angels Den, Lois Cook, commented: “When a company is just starting out it generally has no assets or track record on which to base an accurate valuation.” “Instead most angels rely on their own intuitive judgement of how much money the company could make and what share would make that a good investment.” The research also indicated that most angel investors don’t rely to a great extent on an accountant’s or professional advisor’s valuation.  Almost a fifth of respondents said they didn’t rely at all on their advisor’s calculations and only 5% said that they relied completely on an advisor’s calculations. “Angel investors are drawn to entrepreneurs with passion,” said Bill Morrow, co-founder of Angels Den. “The most recent deals we have done have been based on personality, on the angel seeing some spark and almost investing in the person rather than the idea.”

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