You've got the idea, but you don't have the cash. It's a
common dilemma for entrepreneurs but it's one that can often be
solved by funds from an angel investor. So how can you ensure that
your pitch ends with them shaking your hand and handing you a
briefcase full of money, rather than kicking you out with a scream
for security?
Well firstly, it's important to remember an angel investor is
different from your bank manager or a venture capitalist who invest
other people's money. An angel is looking to put their own cash
into your business. On the one hand, this is great as it means they
can invest in whatever they want, and in general they don't have to
see as large returns as a venture capitalist, so they can plough
their money into smaller companies with a small target audience.
However, it also means they're more careful and suspicious so you
need to cater for their needs. Here's how you do that.
1. Sell yourself
You have to persuade them that their money is safe with you.
They need to know you're responsible and trustworthy. They don't
want to give their funds to someone who has a history of losing
money on failed businesses or blowing cash on pointless
accessories. So it's good if you have a track record of being
sensible with money. And if you do have a few tainted years on your
CV, make sure you explain why they happened and how this time it'll
be different. There's no point trying to hide or gloss over your
past mistakes, as it'll just show that actually, you are pretty
untrustworthy.
2. Pitch
A confident pitch filled with statistics and knowledge of your
business is essential. Angels will scrutinise your idea, so it pays
to have a well written and informative business plan. We've all
seen what happens when someone doesn't know their figures on
Dragons' Den, they end up red faced and embarrased, don't
let that person become you. Typical questions that an angel will
expect you to address are, how you'll spend their money, how you'll
protect their investment in future rounds of funding and what your
exit strategy is.
3. Prototype
It's very unlikely an angel will give you money for something
that's still just an idea. If you present them with
a prototype of your product then they can actually
see what they're getting for their money. If it's a website you
should already have a domain name and a site up and running, and if
it's a physical product you should have one made so the investor
can test it out and decide if they like it.
4. Validate the business
model
Try your hardest to get at least one customer. Having someone
actually paying for your product already proves that people are
willing to buy it. This will give an angel some more
confidence in your business and will prove to them you're serious
about making money.
5. Do your homework on the
investor
Approach an investor that's suited to your business. Someone who
has the knowledge of the industry your business is based in and
will be passionate about the whole idea. If you tell then exactly
how you'd like them to help you and why you think they'll be good
at it, you may answer the question they're asking themselves.
For more information on angel investors, click here