Animal behaviour experts handed out iPads to five apes in an experiment at Port Lympne wild animal park. They quickly learned to turn the screens on and off and seem fascinated by the colours and pictures.
- Remember to tailor your business plan. The plan you pitch to an angel should be different from the one you use to pitch to a bank.
- Figure out the least you need to get to the next stage and raise that amount. Then you’ll have to give away less equity.
- Always ask for feedback after pitching your company. You can learn from each investor that says no, and improve for the next time.
- Try to invest some of your own money in the business. Angel investors like to see financial commitment from the management team.
- Have business plans and pitches of various lengths (e.g. 50 words, 200 words, 500 words, 1,000 words, 2,000 words and the full plan).
- Make sure you can explain exactly what your business does in under 30 seconds.
- Remember that investors will want high returns, due to the high risk nature of angel investing. Of every 12 companies they invest in 1 might be huge, 2 might be good, 3-4 will be marginal, and the rest will fail.
- Never tell an angel “the product will sell itself”. It won’t! An investor wants to see a clear USP & well thought-out sales strategy.
- Be enthusiastic – Investors expect energy and dedication from entrepreneurs.
- Angels like to invest in deals with other Angels who have done this before and learn from them to get started
- Make the most of social media – it’s free and a great way to get yourself known in your sector.
- When pitching for funding, don’t get bogged down in technical details, or you’ll lose the investor’s interest.
- The management team is one of the most important factors for angels. Consider what skills you and your existing team have and what needs to be brought in.
- Angels look to invest in strong markets. You can fix a lot of things about a business, but you can’t fix a bad market.
- Keep your pitch short and sweet, so the investors stay interested and are keen to find out more.
- When you read your business plan, put yourself in the investors’ shoes. Ask yourself: ‘Would I invest in this business?’
- Make sure your business plan isn’t too technical and that anyone can understand it.
- Don’t be afraid to ask the investors questions about their background. They should be keen to impress you and willing to answer any questions you might have.
- To reassure investors, get someone in your team who has successful experience with start-ups and exits.
- If possible, approach investors with a working prototype. Investors like to see, touch and test what they’re investing in.
- Use facts and stats rather than personal opinions. “I think this market will grow” isn’t as powerful as “This market has grown 30% annually for the last 3 years”.
- Positive feedback, customer lists, presales and letters of intent are very useful when trying to convince investors.
- Join an association in the field in which your business operates. This will give you great networking opportunities.
- Decide exactly what you want from your angel: money, contacts, industry experience, entrepreneurial experience, etc.
- Investors will expect you to have a very good understanding of your competitors.
- Google has thrown its considerable weight against a new project aimed to give a helping hand to aspiring UK businesses: http://bit.ly/hrNI6G
- There’s a new iPhone app, Angel Trivia Daily, which tests your angel investing knowledge with a new question every day: http://bit.ly/h6qIZs
- The UK Government has detailed plans to help small businesses start up and grow in the UK: http://bit.ly/i5DHcR
- New 2 million Euro technology investment syndicate established by angel investors in Ireland: http://bit.ly/eWuPbh
- Connecticut tax credit tweak finds angel wings: http://bit.ly/ic3KU8
- Availability of seed funding for Irish companies at highest level in 30 years: http://bit.ly/ejQdzr
Business Plans & Pitching
- How one Group of Startups and Investors Traded the Elevator Pitch for the Ski Lift: http://bit.ly/ij38As
- The power of the pitch: Advice from the receiving end: http://bit.ly/fkDhPr
- Four Easy Steps to Credible Startup Financials: http://bit.ly/evzCrL
- Investor Presentation Basics – how to avoid a Trainwreck Elevator Pitch: http://bit.ly/fwFe8z
- Raising capital from business angels and private investors isn’t as easy as some people think. Here are some tips: http://bit.ly/gWCMU4
- An introduction to Angel Investors and how to find them: http://bit.ly/hmOOyp
- There are plenty of options for getting money to start your business. The trick is finding the solution that suits you: http://bit.ly/igw0g
- Ever heard of Apple, Amazon.com, Facebook, Google & Twitter? They all got early funding from angel investors. http://bit.ly/e6DhnH
- How to Find the Right Investor for Your Business: http://bit.ly/eNk6vz
- Obtaining Funding from Business Angels and Private Investors: http://bit.ly/hv9Eez
- The 6 Biggest Mistakes in Raising Startup Capital. Avoid these traps to increase your chances of securing funding: http://bit.ly/fBfBiK
Marketing & Social Media
- Most FTSE 100 companies ‘fail’ at social media and risk being overtaken digitally by smaller and more agile firms: http://bit.ly/foVy8A
- Five Tips for Marketing Your Startup Business on a Shoestring: http://bit.ly/fy3shM
- 10 Social Media Tips For the Startup: http://bit.ly/eZfHyD
- Top 10 Ways to Build Your Subscriber List: http://bit.ly/e5NVro
- 5 Great New Social Media Strategies (other than Facebook, Linkedin and Twitter): http://huff.to/eo9mBY
- How to Build a Winning Brand for your Startup: http://bit.ly/gOb1mH
- 5 Simple Steps to Social Media Start Up Success: http://bit.ly/g1ktcu
- How to Harness the Power of Social Media Feedback: http://bit.ly/ic7SXD
- Facebook vs. Twitter: Which is Better for Marketing? http://yhoo.it/ijbzCO
Start-Up & Entrepreneurship
- 6 ways to make your Small Startup Business look Bigger: http://bit.ly/e8ibt9
- 5 Common Startup Money Mistakes: http://bit.ly/fQaMgl
- Ex-Googlers Penetrating Startup Hierarchy. There is a Xoogler now at pretty much every top-tier VC: http://bit.ly/eMimLu
- Ten Entrepreneurship Rules for Building Massive Companies from Linkedin co-founder Reid Hoffman: http://bit.ly/eB3QAH
- 5 awesome Small Business Tools you can use to grow your business faster: http://bit.ly/hrWHCK
- 7 Tips On Outsourcing for Early Stage Startups: http://bit.ly/i6erae
- § Secrets of Entrepreneurial Superstars: http://bit.ly/e7r0mn
There’s no question about it: Raising funding for a start-up from angel investors or venture capitalists is hard. Some entrepreneurs seem to think that investors should be falling over each other to fund their project, but the unfortunate truth is that only a small percentage of entrepreneurs are successful in raising capital for their start-up.
Unlike venture capitalists who invest other people’s money, angels invest their OWN money. It’s important to put yourself in the investors’ shoes – how easily would you be persuaded to give £100,000 of your own hard-earned money to a complete stranger? Angel investors may be willing to take on more risk than most, but it’s still a tough job to get them to write you a cheque. Here are a few things to remember when approaching angels.
Business angels are in it to make money
You must be willing to give up some ownership or control of your business, and be able to show a significant return within 3-7 years, as well as a profitable exit strategy. Angels invest for the same reason other people do: to make money. Investing in early stage companies is high risk, so investors expect to see high returns.
Don’t stop moving your business forward
Try to develop your business as much as you possibly can: build a prototype, interview potential clients to gauge their interest, prove the concept, get some letters of intent or pre-orders and possibly even start generating some revenue. The more traction your business has, the more attractive it will be to investors.
Build a team with experience in the right areas
Angels invest primarily in people, so you need to build an experienced management team that has industry expertise and a track record of growing and exiting businesses. If your team lacks certain skills, try to plug these gaps before approaching investors. If you can’t afford to hire staff, you may want to consider giving away sweat equity to make sure you have the right team in place to first make your company investable and then drive the business forward.
Be realistic about valuations
Although you may think your business has the potential to earn you and your investors millions, that’s all it has: potential. Turning a good business idea into a profitable business is harder than most people think, and there are so many potential pitfalls – a new competitor, misspending your startup budget, hiring the wrong staff, the list goes on… Work with your accountant to build realistic numbers and a realistic valuation with clear assumptions that can be defended.
Take investors’ criticism on board
Entrepreneurs looking to raise capital for their start-up will be rejected by most of the investors they approach. Listen when potential funders reject your ideas – their criticism is the best feedback you’ll get about how to make your business more appealing to investors and increase your chances of getting funded.
Angel Investment News
- UK beats the US to a tech-friendly Startup Visa: http://bit.ly/grhGx9
- Angels Look for Investments as States Offer Tax Incentives: http://bit.ly/hZvBWd
- 7 Chicago angels have formed an investment network for startups in the local, sustainable food distribution system: http://bit.ly/fy3x9m
- The StartUp Visa Act will allow an entrepreneur to get a 2 year visa if a US investor wants to invest in their startup http://bit.ly/hCdWfd
- Angel Investing – A Look from Both Perspectives: http://bit.ly/gvTjFR
- How Angel Investing is Different from Venture Capital: http://bit.ly/hdyfdZ
Business Plans & Pitching
- Top 20 Questions to ask before Submitting a Business Plan to Angel Investors: http://bit.ly/eUo3VR
- Perfecting Your Pitch: Four Steps From Good To Great: http://bit.ly/gh1goH
- 10 Tips to an Effective Investor Pitch: http://bit.ly/hfU6Tg
- Implement these 8 steps in your investor pitch preparation and delivery to increase your chances of winning investment: http://bit.ly/gOyzyj
- The Top 8 types of angel investors http://j.mp/eHJqSz
- Private investors: Calling on angels: http://bit.ly/i8hiQe
- 5 Tips To Hooking Yourself An Angel Investor: http://read.bi/hlaO7q
- What business angels look for in a venture: http://bit.ly/gECKR0
- Innovation Is the Top Trait Business Angels Look for When Making an Investment: http://bit.ly/gWCMU4
- Business Angels: The Solution On Where to Find Funding:http://bit.ly/fAyLUP
Marketing & Social Media
- 5 Marketing Strategies to Increase Website Traffic: http://bit.ly/dNBton
- 5 Epic Social Media Fails: http://bit.ly/ed2ipC
- The 15 most Detrimental Social Media Mistakes you’re Making:ttp://read.bi/f8l8pe
- Measuring the ROI of your social media efforts: http://usat.ly/dLNAkH
- Top 100 social brands revealed as Dell, Nike and Starbucks top the table: http://bit.ly/gGI3Gs
- 6 Tips for Entrepreneurs Looking for Press: http://bit.ly/g9cSq7
- More Tips From Social Media Pros: http://bit.ly/fyMMCx
Start-Up & Entrepreneurship
- LinkedIn’s Reid Hoffman’s 10 Rules for Entrepreneurs: http://bit.ly/gko4xa
- 10 Revenue Models for Startups You Should Know: http://bit.ly/elOMmW
- Chinese Entrepreneur confidence index slightly up in Q1: http://bit.ly/fLaeyH
- Five Long-Term Challenges of Starting a Business that Entrepreneurs Forget: http://read.bi/fVCUuM
- Entrepreneur Magazine: Now is the best time to start a business:http://bit.ly/govNDW
- Government research shows TV shows such as the Dragons’ Den are helping to encourage entrepreneurialism in the UK: http://bit.ly/fh8IMn
- Small Business Help Center Supports Obama’s Startup America to stimulate economic growth through entrepreneurship: http://bit.ly/eHmzYg
- Top 10 Success Factors for Entrepreneurs: http://bit.ly/eGzRpq
- Ten ways to waste money on a start-up: http://bit.ly/i44TE5
Our experience tells us that different entrepreneurs look for different types of investors. Angel investors can provide the necessary funding for a start-up business. However, this process is not easy, and when entrepreneurs are finally able to raise the desired capital for their venture, they soon find out they are not compatible with their angel investor or the investors have unrealistic expectations of them. To avoid this discrepancy, business owners are strongly encouraged to learn about the different types of angel investors before they go about recruiting one. Being aware of all the different angel investor types will help the entrepreneur sort through the undesirable ones and choose the correct angel investor for them. Choosing a well-matched angel investor can make the difference between establishing a strong foundation for a company or a failing venture.
After years of meeting and dealing with investor we have found that investors usually fall in to one of these categories.
1. Typical Angels: Individuals with extensive business experience who have operated and owned successful businesses of their own. Their wealth was accumulated over their career. They are more hands on and can add a lot of value to the company in their input. They continue to be involved with high risk investments despite their losses. Angel investors like them possess a diversified portfolio that encompasses all industries, including public and private equity and actual estate. They serve as valuable mentors and advisors to their invested firms.
2. Trend Angels: Less experience than typical angels, but invest significantly in the latest trends of modern technology. Their investments primarily depend on the value of their other high-tech holdings, which can vary considerably. Many trend angel investors enjoy the risk of their deals as well as the exhilaration of bringing a novel technology to the market place. Some may even prefer not to be actively involved in their invested firms simply because they dislike dealing with the daily challenges of operating a business.
3. Numbers Angels: Primarily concerned with the financial reward of high-risk investments. Their motivation behind investing is their perception of what other angel investor gross income may be. Numbers angels tend to stay away from investing when market performance is poor and emerge once the market shows stability and improvement. They view each of their investments as another company added to their diversified portfolio and rarely become actively involved in the invested firms.
4. Corporate Angels: Former business executives from large corporations who have been downsized, have taken early retirement, or have been replaced. Even though profitability of their investment is their overall goal, they also seek personal opportunity when investing, claiming that they are looking for an investment opportunity when, in reality, they are really looking for a job. For instance, many corporate angel investors are known to invest in one company and seek a paid position, which is often part of the business deal.
5. Entrepreneurial Angels: Successful angel investors who own and operate their own businesses. Their steady flow of income allows them to make more higher-risk investments and provide a larger amount of capital for start-ups. They enjoy the personal fulfillment of assisting entrepreneurs launch a successful start-up and rarely take an active role in managing a company.
6. Enthusiast Angels: These angel investors are older (age 65 and up) businessmen who are independently wealthy before their investments. They often invest small amounts of capital in many different enterprises and view investing as a mere hobby. They also do not take an active role in management.
7. Analysis Angels: Considered to be serious angel investors. Even though many are born wealthy, the majority of these angels have acquired their success and wealth through their own independent and strategic efforts. They often demand a board position and are known to impose the same strategies they have used with their own companies towards their invested companies. Rarely do these angel investors seek an active management role, but tend to emerge and be more actively involved when their invested firms do not do well.
8. Professional Angels: These angel investors are professionally employed as doctors, lawyers, accountants, etc. who invest in companies in their related field. They may also provide services to their invested firm (legal, accounting or financial) at a discounted rate. Professional angel investors are of tremendous value for initial needed capital and rarely make follow-on investments.
A great startup begins with innovation. Take Google or Facebook or even the iPhone — these brands began with an idea that would make our lives easier, and eventually, became tools many of us can’t live without.
This is why innovation is the key ingredient that business angels look for when they consider investing in a startup company. An innovator is someone who not only has a clear vision, one he can simply explain in less than two sentences, but also someone who is open and curious to the possibilities that can further his brand or company.
“True innovators don’t just dream up snazzy technology for technology’s sake,” says Mike Lebus, co-founder of Angel Investment Network. “They are looking to solve a real human problem, alleviate some headache in our daily existence. It needs to be something that would affect, for the better, a targeted, good-sized audience.”
Lebus says that when angel investors meet with entrepreneurs, angels can usually spot an innovator right away. Innovators are the ones who come with sufficient knowledge on their product or technology and are open to the problem-solving processes that will get their product to the ideal place it needs to be.
“An idea isn’t just sold out of the gate and then not improved on,” says Lebus. “An innovator is someone who is willing to take a step back and constantly reevaluate how he can make his product or service better.”
Lebus says that entrepreneurs need to be willing to adjust and, in some cases, even take the advice of knowledgeable angel investors. “Many times angel investors are innovators themselves, looking to match ideas with someone who has the follow-through to execute an innovative idea.”
Angel investors want motivated individuals with an innate drive, he says. “Whether that drive is to make money or change the world, entrepreneurs need to show angel investors they’re hard workers, dedicated to creating more than a one-shot idea or fad.”
Weekly Twitter Roundup covering the following topics: Angel Investment News; Business Plans & Pitching; Fund Raising; Marketing & Social Media; and Start-Up & Entrepreneurship
Angel Investment News
- How to be an angel investor: http://slidesha.re/eCGIt9
- Minnesota’s economic, finance & tax organizations provide incentives to start new business and commercial investment: http://bit.ly/gYOycL
- The not-so-quiet startup revolution: Chicago strives for Silicon Valley success: http://bit.ly/fFctMa
- Immigrants are responsible for 25 percent of U.S. start-up companies: http://bit.ly/gScorl
- The 100 most influential technology investors in Europe:http://bit.ly/hubLz9
- A new quarterly report will track angel investments in US early stage companies, starting in the 2nd half of this year: http://bit.ly/fqJXuw
Business Plans & Pitching
- Selling Investors the Problem and the Solution: http://bit.ly/gWCMU4
- Capital Sources for Startup Entrepreneurs: http://bit.ly/gW3cNj
- What you should know about Angel Investors and Venture Capitalists: http://bit.ly/ijE8PB
- 5 Tips To Hooking Yourself An Angel Investor: http://bit.ly/eQkCDC
- 3 Must Know Tips About Finding And Approaching Angel Investor: http://bit.ly/ihgJPO
Marketing & Social Media
- Following Google’s lead, Bing incorporates social media into search results: http://bit.ly/dIrH2N
- 22 Hot New Social Media Tools Worth Exploring: http://bit.ly/fUznO3
- 10 Tips To Build Better Trust In Your Business: http://bit.ly/exn93T
- Charlie Sheen’s Record Speed on Social Media Highway sets Guinness Record: http://bit.ly/enpIdi
- 11 monstrous small business marketing mistakes and how to avoid them: http://bit.ly/gpQMkb
Start-Up & Entrepreneurship
- Sorry Entrepreneurs: You’re Probably the Rule, Not the Exception (Facebook, Groupon, Zynga and Twitter): http://tcrn.ch/fNM9jY
- 10 Big Mistakes business owners or entrepreneurs can avoid: http://bit.ly/fmCZN6
- Startups born out of Google and Facebook: http://bit.ly/e1Nx9T
- Whether you’re an experienced businessmen or budding entrepreneur, here are 10 dos & don’ts of entrepreneurial success: http://bit.ly/dMQIxy
- 23 Things Michael Jordan Taught Me About Entrepreneurship: http://read.bi/gesG1K
The most important aspect of writing a business plan or pitching to angels is selling the problem your solution solves. Nobody is going to buy a solution for a problem they don’t have, which obviously means you don’t have a viable business.
The most important thing when writing a business plan or pitching to angels is selling the problem your solution solves. Nobody is going to buy a solution for a problem they don’t have, which obviously means you don’t have a viable business.
I recently saw an entrepreneur pitching for funding, and it had all the right ingredients – a slick pitch, a good PowerPoint presentation and a nice-looking website. All very impressive, except for one thing… Her business solved a problem that didn’t exist. By the end of the evening, I think even she had realised that she was onto a loser.
The pitches that get the investors most excited offer a solution to a problem they have or a problem someone they know has. An avid golfer, for example, will get very excited about a new golfing invention. Or, if an investor is listening to you thinking “My mate Bob was complaining about this last week, and I think this guy’s onto something”, you’ve got them hooked.
The best businesses evolve from an entrepreneur who finds a problem in their life or business and figures out a product or service that fixes this problem for others. However, before you spend your valuable time and money figuring out the solution, you need to find out whether:
1) Other people have the same problem you do;
2) Enough people have the problem to make a successful business.
After selling them the problem, you then need to give a quick and compelling description of the solution. Time is limited and you don’t want to bore the investors, so don’t get bogged down in the technology and technical details behind your solution. Try to keep it as simple and concise as possible and explain what your solution is and what makes it better than the competition. Is it faster, cheaper, more eco-friendly? If the investors want to know more about what makes it is faster and how you can make it cheaper, they’ll ask later.
Your pitch is meant to give an introduction or overview and a pitch – and a short one at that – to capture the attention of a potential investor. If you manage to sell them the problem and then convince them you have a valid solution, you should have them hooked. Then you’ll have their attention for the rest of your pitch, and hopefully you’ll manage to get some business cards and line up some meetings.
These events are both joyous and frustrating at the same time; there is nothing more joyous than listening to entrepreneurs explaining how they are going to change the world. What is frustrating is that few people have worked out how to pitch their ideas in a simple form.
Organisers are always at pain to explain that their event is not supposed to be like the television programme Dragon’s Den, a combination of entrepreneur humiliation and the hubris of the panel, ‘as much to do with real entrepreneurship as The X-Factor has to do with the Beatles’ as I said in a previous column.
The events I appear at are all about providing useful input to the people pitching; everybody needs a good ‘elevator pitch’ for themselves and their business, if only to be more interesting at social and business networking events. The first thing I explain is that that the elevator does not get stuck for several hours; you have to keep your pitch short and simple.
The worst culprits are inventors, engineers and technologists who feel that they have to cram as many features as possible into their three minutes. In sales, there is the well-known concept of ‘golden nuggets’, as many as fifty amazing features of your product which have been lovingly crafted into product literature by your marketing team.
The problem is that most customers have very short attention spans and can only remember three things about your product. As soon as you mention the fourth ‘golden nugget’ the first and probably most important one drops out of their active memory. By the time you get to nugget number fifty, all the most compelling ones have long since gone, and the prospective customer has also lost the will to live.
It is important to realise that the objective in delivering an elevator pitch is not to secure an order there and then; the best you can hope for is to stimulate enough interest for them to give you another fifteen minutes and to hand over their business card.
The methodology for a good elevator pitch is very simple, and centres around five Ps: pain, premise, people, proof and purpose.
The most important question for any would-be entrepreneur is “where’s the pain?” What pain or problem do you plan to solve? The larger the pain, the more likely people are to give you money to take it away. Pain can come in many forms, but if your product or service saves time and money that is a very good start.
Next you have to explain in simple terms the premise of your business, exactly what you do. For this, you need to be literal and not descend into sloganeering. “We transform people’s lives” is laudable but impossibly vague. “We are an excellent training company, specialising in communication skills” is much more to the point.
If you feel that this is too obvious, then I suggest you visit a trade show and try and work out what each company does, just from the text on their display stands. The worst culprits are being deliberately vague in the hope your curiosity will be aroused, encouraging you to approach someone on their stand to find out what they do. Unfortunately, the vast majority of people will not bother.
The other ‘Ps’ are very straightforward. You need to talk about your people, as entrepreneurship is a team game. Every investor says they look for a credible team rather than a good idea, and every customer says they buy from people not companies.
Proof is the hardest to provide, why anyone should buy from you and not your competitors. Even if you have the best team and products in the world, customers can still be sceptical, and the best proof is examples of your happy customers, in the form of relevant case studies.
The final P is purpose, and the most important purpose of any business is to make money. Potential investors will be looking for a return on their investment, and prospective customers will want to know that you run a sensible and profitable business, to ensure reliable and consistent delivery of your products and services.