Dear SaaStr: What Are Some Red Flags an Investor Might Not Be Serious?

Dear SaaStr: What Are Some Red Flags an Investor Might Not Be Serious?

First, if you’re not sure they want to invest — they probably don’t want to. And … it’s 100% OK to ask. Just ask.

Just ask what are the odds they’d want to invest, based on what they know now.

Beyond that here are clear red flags that an investor might not be serious about investing in your startup include:

1. Overly Complex Terms: If the investor presents a term sheet that’s unnecessarily complicated, with lots of clauses and conditions, it’s a bad sign. Angel and early-stage investing should be straightforward—price, check size, and maybe pro-rata rights. Anything beyond that could indicate they’re not aligned with your goals or are overthinking the deal.
2. Long Diligence Periods: For early-stage investments, diligence should be relatively quick—two weeks tops. If an investor drags out diligence for 30+ days or keeps asking for more and more information, they might not be serious or could be using the time to hedge their bets elsewhere.
3. Unrealistic Control Demands: If they’re asking for excessive control, like board seats or veto rights, especially in an angel or seed round, it’s a red flag. Early-stage investors should focus on supporting you, not controlling you.
4. Haven’t Made Similar Investments: If the investor doesn’t have a track record in your space or hasn’t made similar investments, they might not fully understand the risks or dynamics of your business. This can lead to hesitation or misaligned expectations.
5. No Clear Decision Timeline: Serious investors move quickly when they’re interested. If they’re vague about timelines or keep delaying a decision, they might not be fully committed—or worse, they’re just fishing for information.
6. Focus on Marginal Details: If they’re overly fixated on minor details, like nitpicking a tiny part of your financial model or asking for details that don’t make sense at your stage, it’s a sign they might not understand early-stage investing or are just wasting your time.
7. Unwilling to Commit Without Others: If they’re waiting for another investor to lead or won’t commit unless someone else does, they’re likely not serious. Strong investors don’t need external validation to make a decision.
8. Ghosting or Poor Communication: If they go silent after initial interest or are hard to pin down for meetings, it’s often a sign they’re not serious. Serious investors stay engaged and responsive.
9. Unclear Source of Funds: If they can’t clearly articulate where their funds are coming from or seem to be overpromising their ability to invest, that’s a huge red flag. You don’t want to waste time on someone who doesn’t actually have the money to back up their interest.
10. Too Many Strings Attached: If they’re asking for exclusivity, long no-shop periods, or other restrictive conditions before committing, it’s a sign they’re not confident in their decision and could be stalling.

The best investors are decisive, transparent, and aligned with your vision. If you’re seeing any of these red flags, it’s worth reconsidering whether they’re the right partner for your business.