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Red flags to look out for when finding investors

1. The demand for too much equity : A good investor should own at most 20% of a company. 50% shares for just one investor is too risky and leaves no room for other investors. Also when the startup owners have lesser shares in their own company they may start to loose interest in the company.

2. No Good References

Find out from other founders or startups they have invested in or are currently investing in to know what they are really like. If these people have nothing good to say about them then that’s definitely a big red flag. Make sure to get honest opinions not opinions from founders the investors themselves recommend.

3. they try to control the founders

It is definitely a big red flag when investors try to make everything go their way. These investors most times don’t even know much about your startup or how to run and as such should play majorly advisory roles.

4. Take too long to make decisions:

It’s okay for them to take a while to think about whether or not they want to invest but when they take too much time even after you’ve answered one million questions and submitted a ton of proposals, it might just be a red flag!!

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DTH Africa

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