Most angel investors are not super-rich people but are simply trying to get the best return on their hard-earned savings. In a short space of time you need to impress on them how good your product or service is, how impressive you are as an entrepreneur, that you are targeting a market which can generate a profit and hence that the risk they would be taking is minimised.
Some angels will be passive investors, which you may prefer, but an investor who was previously successful in your sector or a related one can often bring far more in terms of experience, contacts and general business acumen.
These tips will help you make your pitch for investment, whether in writing or in person. Remember, business angels see many propositions, so you need to make yours stand out and capture their attention for the right reasons!
(1) Explain your vision clearly
The starting points are the idea and the individual. Angels will be attracted by someone who can clearly explain the idea behind their business and their vision for taking it forward. Everyone’s style of presentation is different, but you will impress potential investors by explaining in an exciting yet realistic way the potential for your business to grow. Angels will also be impressed with your personal commitment in putting your own money into the business, and the many hours which you have no doubt invested to develop your product or service.
If you do not already have one, start to develop a good network of connections who will help drive your business, as well as help in finding funding. This indicates that you are serious about taking the business forward and about developing routes to market.
(2) Demonstrate robust financial planning
Potential investors need to be convinced that their money will be valued and treated with respect. They want to understand where sales will come from, which requires a business plan, a realistic sales forecasting system and preferably the first order delivered and paid for.
Can your idea be copied and is there any way it can be protected? Do you have the systems in place for the growth you hope to achieve on the basis of the investment? Depending on how long your business has been operating, angels will be impressed by an accounting system producing management accounts, three year financials – including P&L, balance sheet and cash-flow forecast), and professional advisers already engaged.
Read more about angel investment:
- How to avoid bad angel investors
- Five tips to successfully pitch new ideas to angel investors
- Tips on raising investments from angels
(3) Create an outline marketing plan
You may require angel funding to help you get your product or service to market. Although you may not be a marketing expert, provide details about what you have done so far, such as a clear brand identity and a website that is fit for purpose. Try and gain some profile via social media, trade press, customer testimonials, etc. and at least have an outline marketing plan for your product or service.
(4) Have a clear exit strategy
The investor wants to know how they are going to get their investment back (hopefully with some profit), commonly referred to as an “exit strategy”. Are there competitors who are likely to buy you out, or another business which your company would complement?
Although it may seem that you are doing all the work, making your business as attractive as possible will help you obtain the best deal as regards the level of equity you give away (while being realistic) and give you a greater chance of attracting an angel who brings more than just cash to the business.
An investor is giving up their personal funds and taking a risk; therefore, in the short space of time you have it is vital to impress them with how good your product/service is, how good you are, that you have a business plan and that the risk is minimal. Whether it is in writing or presenting in person, aim for as many as the above points as possible and you should be successful.
Phil Mitchell is director of Harbour Key.