The path to a successful business is not always clear. Some entrepreneurs successfully reach their goals, while others struggle with the long and winding road. If you want your startup idea to succeed, it’s important that you understand what steps must be taken in order for it to happen.
In order to find investors, you need to make sure that your business is in the right place. You also need to make sure that you have a great product and service. Once you have these two things in place, it will be easier for you to find investors who are interested in your company. Read more in detail here: how to find investors.
I should explain what an angel investor is and how they vary from venture capitalists before I get into the secrets of how to impress angel investors.
An angel investor is a wealthy person who invests in a company startup in return for convertible debt or equity ownership.
An angel investor is a high-net-worth person who invests their own money in start-up businesses in the hopes of making a profit. Many angel investors are entrepreneurs, executives, or community or business leaders.
“An rich person who offers finance for a company launch, generally in return for convertible debt or ownership stock,” according to Wikipedia.
How Angel Investors Invest
Angel investors might invest on their own or as part of a community of angel investors. Angel investors come in all shapes and sizes, from novices to seasoned investors, and they invest anywhere from $5000 (typically, an angel group pulls their funds together to make a larger investment—like $300,000—that goes into one company after the group votes) to much larger amounts, such as $1 to $2 million per deal. The person or angel group determines the kind of transactions and sectors they engage in, as well as the stages of companies and the amount of money they spend.
As a consequence of co-founding two software firms and receiving just short of $1 million in angel money, I’ve presented to hundreds of angel investors over the years. It was my responsibility to pitch to the angel investors since I was the CEO of both firms. The due diligence phase was my favorite aspect of proposing to them.
If you’re lucky, and your initial short pitch piques an angel’s (investors or groups) interest, they’ll want to schedule more time with you to get to know you and your team, as well as to dig deeper into your business plan (i.e. what’s behind your financials, your go-to-market strategy, your current traction in the marketplace, your competition and why you’re better, your intellectual property or “secret sauce,” your exit strategy, and so on).
I rapidly discovered that no two angels are same. What one angel finds appealing, another may not. One of the angels I presented to, for example, was quite worried about our competitive environment, but another was more interested in our financial assumptions and my team’s ability to deploy in an agile manner.
Venture capitalists vs. angel investors
Angel investors are distinct from venture capitalists in a number of ways. Venture capitalists (VCs) normally invest over $1 million, and more frequently over $3 million, although this has begun to shift in recent years as a result of the rise of angel investor organizations, notably “super angels” making investments.
As highlighted in this TechCrunch piece, VCs now have to compete with “super angels.” The Angel Capital Association outlines the distinction between angel investors and venture capitalists in a way that I like: “Angels often spend their own money in startups and early-stage organizations, while venture capitalists (VCs) typically lend funding obtained from investors to later-stage enterprises for development.”
Venture investors may wish to hold the majority of your firm, depending on their preferences (i.e. 51 percent). This will undoubtedly alter company dynamics, therefore it’s critical to undertake due research on any investors interested in putting money into your business.
Always take a look at the firm’s investment portfolio and reach out to the CEOs and founders of those firms to learn more about what it’s like to have those investors on board. Ask them straight up: if they could do it all over again, would they accept their money? What are the advantages and disadvantages of accepting venture capital?
What does it take to impress angels?
Because no two angel investors are identical, I thought it would be great to add advice from a cross-section of angel investors from throughout the country on what impresses — and, in some instances, turns them off — when meeting with entrepreneurs. Because of how diverse angel investors’ backgrounds might be, I’ve liked dealing with them throughout the years.
Below, you’ll find advice from angels from many areas of life, from a daytime angel to a nighttime comic to a sales recruiter and trainer angel. They’ve all invested in companies over the previous three years and have some fun and unusual advice on how to wow them and perhaps land in “startup paradise.”
“When the entrepreneur speaks to me about fixing a particular customer’s issue, I am impressed.” I sit up and take attention if he/she really understands what the consumer wants and is prepared to pay for.”
— Dan Whitaker, Corvallis, Oregon Angel | Twitter | Linkedin
“Entrepreneurs that present themselves professionally yet in a friendly/down-to-earth manner excite me the most. I have to assume they are confident in their own goods. They must be persistent at all costs. Angels receive a lot of emails, so they make a point of following up (“Oh, here’s this Pete guy again” vs. “who are you again?”). It also helps if you use proper spelling and grammar.”
— Candice Yoneyama, Los Angeles, CA Angel | Twitter | Linkedin
“I like entrepreneurs that understand their statistics and are realistic about their values. I’m also drawn to businesses that can explain how they’ll succeed even if they don’t secure the next round of investment.”
— Jessica Magoch, a Philadelphia-based Angel | Website | Twitter
“It all boils down to ‘intrapersonal communication,’ in my opinion.” Every business has a wonderful concept, generally conceived by a “visionary,” that will lead to financial success. Following that are predictions and marketing plans—which, of course, every business has. So, what’s going to set you apart from the rest? People who can express and illustrate why I should share their enthusiasm and drive to participate persuade me. As the founder of a business, you must sell yourself, your firm, and your vision to angel investors, demonstrating that you have the ideas, strategy, team, and capacity to deliver on what it means to be engaged.”
— Don DeZarn, Eugene, OR Angel
“By day, I’m an angel investor, and by night, I’m a stand-up comedian. A feeling of financial responsibility from the founders is one of the things I look for when investing (along with the obvious issue of can it produce money). When you use other people’s money, you have a propensity to waste it. For example, you may remember that GoDaddy’s founder spent $90 on a conference table, which he claimed performed as well as a $10,000 conference table. I want to see a feeling of environmental responsibility, which goes hand in hand with the concept of spending less money.”
— Dan Nainan, New York City, NY Angel | Twitter
“Too many entrepreneurs teeter on the precipice of hubris and stupidity. In an attempt to appear confident, their pitch approach comes off as arrogant when they suggest they can defeat the chances of failure at the pre-angel stage, and they can win competition that is typically well ahead of them. When it’s evident that they haven’t done their homework on competitors, ignorance surfaces, particularly when I hear the most deadly and stupid statement: “No one is doing what we’re doing.”
— Kim Garretson, Edina, MN Angel | Twitter
“I’m pleased when an entrepreneur dresses properly, speaks clearly about who they are and why I should give them my money, and interacts with me in a language I understand.” After all, I’m only a layman when it comes to their industry—and my time is valuable.”
— Angel from Eugene, OR, Gena H.
“Entrepreneurs excite me when they show a proven income stream prior to seeking funding. This demonstrates that they have calculated the total addressable market (TAM) they can acquire realistically. They should also demonstrate that they’ve calculated the cost of accessing that market by comparing a customer’s lifetime value (LTV) to their acquisition cost (CAC).”
— Angel from San Francisco, CA, Anthony Alfidi | Twitter
“Align your strategy, tactics, metrics, and narratives. Make sure the summary memo, pitch deck, and key storylines all match by using a bare-bones condensed company plan as the storyboard. It may sound apparent, but every year I see over 100 pitches/plans, and at least half of them turn around and eat their tails at some point.
Forget about that silly IRR (internal rate of return) you learned in business school. It’s the consequence of compounding wild uncertainty by wild uncertainty, all in calculator mode, and it’s completely meaningless. And implying that angel investors want you to reduce their uncertainties to a single figure is either dumb, ignorant, or disrespectful (depending on the context). Your investors want to conjure up their own ROI figures in their own unique manner.
Don’t be a dot, but rather a line. Maintain contact with investors and demonstrate progress over time. Milestones are a great way to build credibility. Don’t just say you have traction; show it.”
Tim Berry, Eugene, Oregon Angel | Website | Twitter
“I appreciate hearing raw honesty no matter what, and it’s much better if it’s related to previous events, even childhood, since it emphasizes integrity and openness.” You don’t have an answer for everything, either. If you’re asked an unusual or surprising question that no one could possibly know the answer to, respond with, “I’m not sure, what do you think?” This will show how we’ll make choices if we’re in business together.”
— Dan Fugardi, a Beverly Hills, California-based Angel | Website | Twitter
This post is part of our Company Funding Guide: Bplans can help you finance your business right now.
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Angel investors are the backbone of the startup world. They provide funding for new startups and can help you get your business off the ground. If you want to impress angel investors, here are some tips on how to make it into “Startup Heaven.” Reference: jason calacanis net worth.
Frequently Asked Questions
What do angel investors look for in a startup?
A: angel investors look for a few different things in a potential startup. The most important thing they are looking for is the product, and how it will work after being released to the public. They also care about growth rate beforehand and what market share does this company have. Additionally, they want to know if their investment will be protected by patents or copyrights that ensure exclusivity over specific territory of sale – meaning no one but them can sell the same product in that region/country
How can I impress angel investors?
A: The best way to impress angel investors is through a good pitch deck. This will include your companys business model, what you want from the investment and how much money it would take to make your idea happen.
Do angel investors help startups?
A: No, angel investors do not help startups (with the exception of SeedInvest and Angel.co).
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