Joshua Saunders

I recently attended a panel discussion called Meet the Angels.  The panel included four angel investors from different angel networks who spoke about why they invest, what they look for and provided advice on how to pitch your business.  We also saw recent videotaped presentations from entrepreneurs to angel networks, and the presentations were critiqued.  I thought I would provide some advice for those of you who are currently or may in the future look to raise money from angel investors.

Key Factors to Establish Credibility with Angel Investors

1. When presenting, state the problem as early in the presentation as possible, and make sure your presentation includes the solution and execution.  Address how money will be made and a specific sales strategy.  I can’t stress enough that the sales strategy should be specific.
2. You must have the right team in place.  If you don’t have the right team, you should be in the process of getting the right people on board.  Surrounding yourself with other successful businesspeople boosts your credibility enormously.
3. Show a readiness to introduce the product or service to the market.  You can’t be years away from launching.
4. Sell both the idea and the team.  Be excited!  From watching several presentations, I can tell you first hand it makes a huge difference if the entrepreneurs are excited about the business!
5. Have skin in the game.  A definite must.  The entrepreneur has to be assuming risk with the venture.
6. Present a realistic view of the market.  You should know your market intimately.  Narrowly define your target market.  A target market is NOT 20+ year old males, it should include precise demographic and psychographic information.  Be specific.  Understand there are always competitors.  If there aren’t competitors, maybe there is no market.  If there is a problem and truely no competitors, then the status quo is your competitor and use that as a comparable.
7. Numbers always change, but having a well-thought out financial plan is essential.  And if you are already bringing in revenue, show the hard numbers.  Don’t count customers you don’t already have.
8. Evaluate potential exit strategies beyond the most common approaches.  Not every company gets bought out by a Google or Yahoo.  There are hundreds of thousands of businesses that look to grow through acquisitions.  Investors need to know they are getting a good ROI.  Most angels will look for 5X to 10X.  Some won’t even consider your business if you don’t immediately show a 10X return on exit.
9. Raising capital from angels is a learning process.  If an angel or network doesn’t like your business at first, don’t give up.  Keep working at it and show progression.  If you could come back six months later and show you made X development and gained Y additional customers, then it will show your determination.  If the angels still say no, keep working at it, show more progress and come back.  Showing progress in meeting milestones is a big factor that investors look for.
10. Know your needs, your audience and their requirements.  If you need a small amount of capital, consider individual angels, they will move faster than networks.  If you are approaching networks, make sure they have knowledge or interest in your field.  If you have a tech business, don’t approach a life sciences network.  Get an introduction to an angel before asking for money.  If you can get an individual angel to champion your business to the network, it will flow more smoothly.