FOR PROFIT TIPS
- Today's Times
- Angel Investors
- The Elevator Pitch
- Investor Presentation
- Business Plan
- Challenging Times
- Competitive Barriers
- Measuring Performance
- Strategic Alliances
- Strategic Planning
- Sustainable Growth
Sales & Marketing
- Better Branding
- Developing E-newsletters
- Online Feedback
- The Plan
The Human Element
- Advisory Boards
- Corporate Board
- Selling Your Business
are not average investors: They are people who can financially
afford to indulge their love of risk. To be an angel, one must be
an "accredited investor," which the Securities and
Exchange Commission defines as someone with a net worth of at
least $1 million or an annual salary of at least $200,000.
to the Center for Venture Research, about 400,000 angels invested
about $35 billion in 50,000 businesses in the year 2000.
Typically, an angel invests less than $1 million in an early-stage
provide additional value beyond the funds they provide. Many were
successful business owners and entrepreneurs who can also bring
you valuable industry experience, executive knowledge, creative
ideas and contacts. When targeting angels, here are some
a Convincing Case:
Angel investors may be willing to take on more risk than most, but
they still need to see a well thought out plan with a product that
has a documented “must have” need and a competent team behind
it. It is rare that an entrepreneur can raise money from angels
without clearly defining the competitive landscape of the business
and how the product has a clear competitive advantage over others.
Investors will want to know the barriers to entry. Namely, how you
will keep competitors from being in the same exact business. Some
barriers to entry might include patents, trade secrets and
a Prototype and Line Up Beta Testers:
Angels do get involved in the early stages of a company, but not
usually before there is a working model of the product and
potential customers have committed to test the product. Having a
prototype will greatly increase your chances of attracting angel
investors. Demonstrating that you can get paying customers in the
real world puts you far ahead of entrepreneurs who simply have a
business plan and an idea. Later stage companies need to show they
have accomplished revenue growth and have paying customers who
validate their pricing strategy.
Up: If you want to start a business, be prepared to invest your own
money. Entrepreneurs who expect angels to risk money in their
venture, better throw something into the pot. Those entrepreneurs
who are not willing to assume such risk are not considered serious
by investors, and will most likely not receive funding.
Your Search: Identifying
angels who are suitable for you up-font will increase your chances
of success. To help you identify appropriate angels when pitching,
ask them what they look for in a company, how much they typically
invest, what kind of return they expect on their money. In
- Concentrate on Your
Industry: Angels like to invest in companies whose
business they know something about. Many angels, having
previously been successful entrepreneurs, will tend to lean
toward their prior industry experience.
- Target Investors Interested
in Your Stage Company and Deal Size: Some angels will only invest in seed or
start-up companies, while others seek later stage ventures
looking for expansion capital. Angel investors will have a
dollar range they are comfortable investing. This can range
from $25,000 to several million dollars.
- Look Close to Home: Angels
frequently want to be actively involved in your business. Make
it easy for them to do it in person by looking within a
50-mile radius of your corporate headquarters. You may have to
expand your horizons, but try to stick within a day's drive.
- Look for Risk Takers: Since
there's no such thing as a national directory of angels,
you've got to put together your own list. Look for other
interests that might indicate a risk taker, such as sky
diving, sailboat racing or adventure travel. But remember just
because someone is a risk taker, it doesn’t mean that they
won’t do a lot of homework to control those risks.
some investors do read plans that come over the transom, plans
referred to them by a trusted source, such as a business
associate, lawyer or accountant get far more attention. Other
options to meet people with deep pockets are to present or at the
very least attend a venture capital conference or angel club
meeting. Network to find out about these opportunities.
spend a lot of time with entrepreneurs especially in the early
stages of building a company so getting along is crucial.
Chemistry covers whether you like, trust and are in sync with each
other. To have good chemistry you have to personally connect, and
have similar expectations, vision and objectives for the company.
Being able to answer angels questions without feeling threatened
is also crucial.
Persistent and Patient: Entrepreneurs
must be committed, passionate, and thick-skinned. Raising capital
is a time-consuming, ego-challenging process. It is not unusual
for a startup entrepreneur to spend 50%-70% of his time raising
capital from angel investors, a process that can average 3-6
months and in an uncertain market, it take even longer.
Due Diligence On Angels:
Entrepreneurs should be choosy about who they take money from.
Make certain that you really know your angel. Understand his
motivation and expectations for exit strategy and ROI (return on
investement). Know what added value they can bring to the table.
Knowledgeable angels with good connections can jump start a
company and keep it thriving. Well-connected angels can even make
it easier to get additional rounds of financing including venture
Haggle Over Terms:
Efforts to horde stock and inflate valuations will make the
company less attractive to suitors. Let experienced professionals -
lawyers and accountants -
handle terms and valuations. Heed their advice.
Angels want to know how the company is doing whether is good or
bad. Staying in touch by phone, email and even a monthly letter
will keep investors happy.