29. November 2017

Angel investors are high net worth individuals that are seeking a large return by investing in what they perceive as fast growth startups. At any given time there are about 250,000 Angel Investors. For the most part they like to invest locally so they can drop by and visit their investment. Angel Investors tend to invest in that which they know and/or feel that their network of contacts can be of great value to their investment.

Angel Investors come in second for private investment capital into small businesses behind only that invested by the principles of the company and their family or friends. The average investment is normally less than $300,000 as this is a private individual investment and not a venture capital fund. Securing an Angel Investment can often lead to more significant investment interest from venture capital or other investment groups.

More than likely you will make your pitch to a single investor or a group of Angel investors. The setting is typically informal and your pitch needs to be brief and to the point. Pre-planning is the key so come prepared to share full product or service details, market size, market capture, competition, etc. It does not need to be a complete business plan but it should be a full executive summary. Slide presentations with talking points make a good pitch. Even a short professional video can work well. Avoid the hype, such as “unlimited potential”, “massive market”, “no competition”, “never been done before”. Anything that cannot be backed up by facts and stats should be left out of your pitch.

Angels are savvy investors who are focused on how their investment is going to be used to make them money. You should be excited about your business and its opportunity, but not over the top. These Angels are being asked to invest in a real business and not it something you thought it would be cool to do. Bottom line is they are all about turning their money into more money and finding out if you having the education, experience, desire, and will to do that.

If you can turn your passion into production you will have their interest. This is where demonstrating how well thought out your business plan is plays a critical part. For example if you are projecting your gross margin to be 20% where the average in your market niche is 8%, then you better be able to show exactly how and why.

Trust is a big factor in their decision to invest in you. Angel investments are very personal. They are investing in your business, but even more so they are investing in you. You cannot slide past this one. If they ask questions that you don’t have the answers to, then the best response is “I don’t know, but I will find out”. If you make something up or lie about the answer you will get found out and the deal will blow up. Be confident in your answers, but even better is to be informed and prepared.

Don’t have your first pitch be to the Angels. Practice with a coach. Practice with your friends and family. Seek out other business associates and pitch them. Get feedback from them and be ready to give a great pitch without a bunch of gaffs and without stumbling through a lot of unprepared for questions.

Lastly have a really good idea of the amount you are looking for and what you are willing to give for it. If you want $300,000 for 10% of your business and they offer $200,000 for 20% are you prepared to accept it?

Alternative Business Financing, Business Startups