There is a reason angel investors are called just that because they are angels indeed, who see benefit in your untested products or idea and invest in your venture. They are the early-age risk-takers who bring more companies in the marketplace. It is because they want high return on their investments that they become angel investors plus, they get to work with bright individuals who are brimming with ideas and innovation.
Let us just say that it is not just a great idea or your conviction that will draw the angels to invest in your business. They are looking for some emotional connection whether it is in the form of what is to offer or how you present the overall idea. It is also a lot to do about how your business would have a sustainable growth, how it leverages technology and how it proposes to create quick landmarks. But that is not all. An entrepreneur may need to prepare themselves long and hard to be able to have an investor offer the start-up money. Having said that, not only is finding an ideal investor a fabulous breakthrough but you can ace the criteria simply auctioning on some of the basics of your business. So, the next time you pitch, these are a few things you might want to consider:
Angels often invest in people rather than products. Having an A-team with the most credible and likeable approach to the business tends to attract the angels. You may have a great idea on hand, but if you do not have people who have the necessary expertise or skills to execute that idea then it would never work with the investors. Angel investors want to be a part of your success story and so they look for the resourcefulness and entrepreneurship that you and your team bring in tough times. They would also be interested if one of the founders has been in a startup before and has had some experience in establishment and advisory.
Rakesh Malik (Managing Director & Founder- Combine Ways) adds, “If you are not thorough with the financial terms or taxation or creating the bottom-line,in what way your venture will be profitable, how can you optimize whatever little funds you have put, it’s quite challenging. You need someone to support it, to understand. That is what team building is. It’s good to get that person on board.”
A convincing and completed plan is an absolute must before you pitch to an investor. This means it should have had 360 degrees view of all the aspects that involve the business model, market evaluation, financial projections, competition study, problem-solving, edge over competition and how the investor will make money from your business. Of course, it is not always true that if you have a business plan your success is guaranteed. It simply indicates that you have a clear understanding of your business standing in the market and that there is opportunity for solid return. Since the investors involve themselves in a high degree of risk, so they expect not just getting their money back but a higher return on their investment, sometimes even seven times more!
Angel investors are always looking for businesses that need a minimum viable product to reach the market space that can quickly scale and raise enough money for the operations. Businesses that have a large workforce or long sales-cycle often tend to scale slowly. Not only that, such businesses take far longer to establish their name in the market, thereby not creating the necessary escalation upwards. Let us take the example of companies like Facebook, Uber, AirBnB and Alibaba who have had minimum input from the company itself but has could implement a structure that allows the public to use their own assets, for profit. Not only are these exciting startups but they also held a promise to deliver great returns.
Smriti Chandra (Founding Partner at First League Ventures) shares, “When you’re raising a seed fund, at that point of time angel networks will want to look at some bit of traction that has happened in your business; either the product has got ready , there is some kind of alpha/beta launch that has happened , some level of progress in the project.“
The investors are looking for smarts, passion and drive in an entrepreneur. But more than that, it is your integrity that will hold the collaboration between you and them. During the liaison, there could be a whole lot that can go wrong, but if the entrepreneur can build that trust with the investor, in most likelihood the bond will bear fruition. There are personal qualities like determination, resilience and passion that will make the investors trust that you are note just good at leading the team, setting goals, and managing finances but also great at rising to the occasion when the going gets tough.
Even though angel investors patiently and willingly make long-term investments, yet they need to have a clear understanding of how they are going to reap the return on their investment. Therefore, having a clear and viable exit strategy is an essential element that you may want to prepare while preparing your pitch. Of course, while forecasting the entrepreneurs must be realistic and not come up with outlandish claims that do not match the reality, because that would certainly put the investors off.
Getting the investor have eyeballs for your business, be sure to keep your business investor-ready. This simply means being ready with your business plan, restructuring your business strategy, keeping your finances clean and having a killer team to seal the deal. Once you have done this, simply tailor out a pitch by incorporating what we have discussed here. Investors are always on a look out for a pitch where their inputs are not required at all!