Startups need a partner who will be included in the company, who’s going to share their expertise, experience & knowledge with them, someone who has the right connections, who sees them as a good investment opportunity & ideally knows the niche – Angel Investors.
To get a head start with its business, every Startup needs an Angel Investor but they need to be careful about who they’re partnering with. Not every Angel Investor is a good match for every company. A lot of Angel Investors are usually just interested in quickly returning their investments & that’s not what Startups need.
Be careful who you partner with
When looking for funding, smart Startups will look for more than just a check. They will look for an Angel Investor.
Angel Investor is a type of Investor who will not only provide you with funding but will support you through your journey & fight for your business to succeed. No money can replace a person who has experience & is willing to share their knowledge. Angel Investors are usually people who have several investments behind them & with every investment they gain new experiences. They will stop you if they see you going in the wrong direction or are on your way to making a mistake. They’ll provide insight & best practices from the market because they believe your project to be a good business opportunity. Besides funding & helping a business grow, Angel Investors sometimes tend to partner with other Angel Investors which means they can provide you with more funding.
A mistake that many Startups make when looking for funding is they partner up with the first Angel nvestor that comes along. In their need for quick Startup funding, they forget to think about the long-term benefit of the partnership. That mostly happens with young startups looking for pre-seed funding or seed investments since they don’t usually have profits at those early stages.
When partnering with Angel Investors it’s important to look at the Angel Investor as if you’re married but in a business aspect. You’ll be sharing assets & working together for a long time. So be sure you choose an Angel Investor who won’t bail on you at the first obstacle. You need someone to provide you with support through good & bad times.
How & where do you find Angel Investors?
Luckily, these days there are a lot of Startup investment platforms like PitchSee made to connect Startups & Investors but before starting your search for an Angel Investor, there are a few things you need to cover first.
When reaching Angel Investors it is important to keep in mind that Angel Investors are very busy people & they hate wasting time. They are where they are because they make every second of every day count & they know how to recognize good investment opportunities quickly. What does that mean for you?
It means you have to be ready when reaching out. You need to know your business to the core, you need to know your numbers by heart & you need to have clear guidelines of where you want your business to go. Most importantly, you need to be passionate about what you do & you need to convince Angel Investors to believe in that passion.
Keep in mind that you’re not the first Startup trying to convince them to invest in your business. They’ve heard hundreds of young entrepreneurs like you telling their stories. So, you need to be creative, you need to stand out & show them that you have the solution everyone will want & need. Also, before talking to them, be sure to do your research. Find their previous records of funding Startup businesses, & see what’s important to them when deciding whether or not to invest. If you’re prepared, you’re increasing your chances to be seen as a great investment opportunity.
The worst thing you can do is come across as unprepared or uninterested. If you didn’t take your time to do the research, why should they give you their time to hear about your project? Why should they trust that you’re a good investment opportunity, that you will do everything to succeed & be committed to the project if you didn’t show that commitment at the start? The point is, you need to grab their attention quickly & efficiently. So, act like it’s an all-or-nothing situation. Either they’ll be hooked from the start or they’ll forget about you the minute you exit that door.
How to prepare your pitch for Investors?
As we mentioned earlier, Angel Investors are people with lots of money & little time. That means your pitch mustn’t be long & it needs to be attention-catching right from the start. The type of pitch that will surely bring you closer to your Startup funding is a video pitch. The usual type of pitches, as we’re sure you already know, are pitch decks & PowerPoint Presentations but that’s all in the past now. Video pitches are the new pitch decks. Why? Well, because spoken words in a video format are more attention-catching than words written on paper. You can say a lot more in a video pitch than in a pitch deck & in less time.
When creating a video pitch it is important that it lasts no longer than 120 seconds. Although you might be wondering right now how to explain everything in 120 seconds, you don’t need to. For your first meeting, you must focus on 3 key things:
- The problem
- The solution
- The team
When talking to an Angel Investor for the first time, you should keep it short, concise & interesting. They want to know what is the problem that keeps people up at night, the solution that will solve that problem & the masterminds behind the project. Maybe you think presenting your team at the start isn’t important, but believe us when we tell you that most times the team is the breaking point for Angel Investors when deciding whether or not they should invest in the business. Why? Well, it’s simple actually. You can have a real problem & a groundbreaking solution but if the people behind the project don’t instill confidence that they are able to execute the project successfully, that project is too risky to invest in. That’s why you need to show your commitment & your passion, show them that you truly believe in your project & convince them that you’re in it to win it.
Last, but not least, when pitching your project remember to always:
- Be honest
- Be genuine & authentic
- Know what a win-win situation is
Never exaggerate your numbers, sooner or later your fake numbers will float to the surface & you’ll lose Investors’ trust immediately. Nobody likes to be lied to, especially someone who’s giving you their time & money. Also, be authentic & be yourself because they want to work with a genuine person & not someone who’s faking just so they can reach their goal. They’ll look right through you. Most importantly, be sure to explain to them that you know what a win-win situation is. Tell them how they are going to make money & tell them how you are going to succeed as well.
Prepare yourself for tough questions
If you catch Angel Investors’ attention at the start, they’ll want to know more. This is where you need to know & confidently explain everything you can about your project for them to even consider you as a good investment opportunity. Remember, you’re asking them to climb a building with you & they want to know if you have a safety net. They won’t be pulling money out of their bank accounts if they don’t believe that you & your project have what it takes to succeed. They’ll be roasting you with questions & you need to be prepared for every one of those questions.
Just imagine yourself in their position. Would you just give away your hard-earned money to the first person that comes along? Of course not. You would want to know every little detail on how that money will come back to you by double. Yes, investments are a risky business & Angel Investors are aware of that. There’s a chance with every investment that they’ll lose money but they can at least minimize the risk of that happening & that’s why the tough questions.
A serious Angel Investor will most definitely ask you about your due diligence. If you want to see them funding your Startups business, they need to be sure that there are no loose ends & that you thought about the potential liabilities that might occur. Every Startup has issues & that’s normal. You must react to these issues & be open about them. That will convince Investors that you’re trustworthy & that’s the type of person they want to be in business with.
Know when to stand down
A lot of Startups don’t succeed to get funding on their first try but it’s important to know how to take rejection gracefully. Fighting with Angel Investors & trying aggressively to change their mind will only decrease your chances of them ever investing in your project. Also, the bad experience will surely have them talking with their fellow Angel Investors & you don’t want that kind of negative reputation of you as a founder or your project circling around.
Maybe they’re not just ready to invest in your business. You need to take situations like this as a motivation, to be better & to upgrade your project. Ask for feedback. Listen to them, analyze the situation & work on those deficiencies. If an Investor tells you you’re positioning yourself on the wrong market or that the price of your project is too low or too high, go back to the office, go over that business plan one more time & calculate your numbers once again. They’re surely on to something & with their experience, you should better take their remarks into account. That way you can do better with the next Investor. Who knows, maybe the first one will change their mind.
Also, think about it from the other perspective. Who says that that Angel Investor was the right one for you? Maybe the next one will be a much better match for your project & think of you as the perfect investment opportunity.
Believe in your project so Investors can too
Believing in your idea is the most important thing if you want to succeed. If you’re not believing in your idea how do you expect someone else to? It’s perfectly fine to dream big but you need to find the balance between dreams & reality. Every Startup started as an idea somebody genuinely believed in. Yes, earning money is the end goal here but you should never forget how the idea started & how you want to change the world with it. By showing Angel Investors you truly believe in your innovation, you’re making them believe that you’ll give everything you can for it to succeed.
With that said, you should not forget that no matter how exciting it is to present your vision, numbers are equally important. Information about expected profits & costs are necessary to make your dream come true. Knowing your numbers is an excellent convincing method for Investors. So just keep your numbers real & your dreams big, everything else will align with that.
Have an exit plan
Almost every Angel Investor wants to know that you have an exit plan ready. That way you’re showing them that you thought about everything & that you’re prepared. We know you don’t think about selling your company at the beginning, but that doesn’t mean you shouldn’t be ready. A Startup can exit with one of these two strategies: selling its business to a bigger company or becoming public. The usual way for Startups to exit is by being bought by another company. For that to happen, Startups need to have all the documentation prepared & their books clean. Angel Investors also make money by selling the company so have that prepared. That way you’re showing them that you thought about their interest in your deal. It doesn’t mean they don’t believe in your vision & that they’re only interested in money, but it’s only logical they want to know how they’ll profit from it.
All Startups have a personal, deeper connection to the project as it is something they’ve created & need to bring it up. For Angel Investors, on the other hand, it’s not that personal. Of course, they want you to succeed, both for you & the money, that’s why they’re providing you with more than just funding by sharing advice & their expertise. But at the end of the day, they want to profit from the deal & they’ll appreciate you showing them that you took that into account & that you’re working on it to make it happen.
In conclusion, Angel Investors are not regular Investors. They help you with more than just your Startup funding. They provide you with their support, knowledge & experience. Grabbing their attention is hard for a reason, so you must show them that you’re committed, know what you’re talking about & that you’re thinking about their interest too. In short, show them you know what a win-win situation is. When you prepare everything to start reaching Investors, be sure to join a Startup funding platform like PitchSee. They’re a shortcut to finding Angel Investors.
Inspired by a book “What Every Angel Investor Wants you to Know”; Brian S.Cohen and John Kador