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Don’t get angel investment from Warren Buffett

If you think angel investment may be the first step on the way to raising subsequent venture capital rounds for your business, don’t raise money from angels who don’t know your business. So if you are starting a technology company focused on Facebook applications, don’t raise money from Warren Buffett (or anyone with lots of money but who doesn’t know your space at all). This does a few bad things:

  • Warren Buffett will add zero value to your social media startup because he doesn’t know the business.
  • Warren Buffett will be way too busy to deal with you or provide introductions even if he did know your space. You’re not material to him in any way shape or form nor are you interesting most likely.
  • Investment by Warren Buffett signals to other investors including other angel or venture investors that you were unable to convince someone from the relevant domain to invest in you which raises red flags. If people with expertise in your domain were unwilling to be angels and you had to get Warren Buffett, that might mean your idea is not that good. Of course, traction at this point trumps the presence of Mr. Buffett.