What Angel Investors Are Looking for When Funding a Start Up
13 Apr, 2017 / Comments: Comments Off on What Angel Investors Are Looking for When Funding a Start Up / By William Mahnic
When you’re trying to start a new business, your options for funding can be limited, and it can be hard to accumulate the money you need to get your feet off the ground. A popular option for those just getting started is to seek help from an angel investor. Angel investors are wealthy, experienced, businessmen and women who are looking for an opportunity to invest and be involved with new businesses. Every year, they are approached by numerous hopefuls, and turn down a good portion of them. Understanding what angel investors are looking for can greatly increase your chances of getting the help you need to get started.
Top-Notch Management Team
While the idea for your business is important, angel investors are more interested in the people behind the concept. A great idea is nothing without a top-notch team to execute it. After all, they are not only investing in your idea, they’re also investing in you. Make sure you have knowledgeable, experienced partners to fill key management roles.
Along with experience, angel investors look for teams with integrity, those who are resilient, thrifty, passionate and determined. It is traits like these, that will get you through the tough times. Investors need to know that you are trustworthy.
A Solid Business Plan
A business plan that is convincing as well as complete is a must. Angel investors want to see that you have a fully thought out vision, and you’ve put the work into figuring out how to bring that vision to fruition. You should be able to demonstrate financial projections, market specifics and marketing plans. Market research and surveys can be quite useful, but you can also prove there is genuine interest in your product through more modern approaches as well, such as crowdfunding. Other things to have in your business plan that can help include an investment structure that allows them to have a role in the business, that they can be actively involved, and that you have a viable exit strategy.
You Have Done Your Research
Angel investors are looking for a good reason to invest. They are already, or have been in the past, successful entrepreneurs, and looking for an opportunity to help create a thriving business, simply for the sheer fun of it. However, many investors tend to favor a specific sector, such as consumer products, women-owned businesses, or those that are environmentally conscious. Having a more targeted and personal pitch can be extremely effective for getting qualified interest.
Investing in startups is a risky business for angel investors. They are giving you a substantial amount of their personal money, and trusting that you won’t simply use it and lose it. They also want to ensure that they will be doing more than simply making that money back, otherwise, why would they waste their time? Angel investors want to see that your business has the potential for growth, and can give them a higher return on their investment. Ideally, that growth, and therefore return on investment, is often expected to happen within 5 to 8 years. If your company relies heavily on a sizable workforce, or long sales-cycles, your ability to quickly scale your company becomes hampered. If you are able to offer something that can scale quickly, you have a better chance of impressing your potential investor.
You Offer Something Unique
Angel investors don’t want to waste their time with products that are already dominated by one or two larger companies. These established companies have the resources and abilities to take your product or service, duplicate it and improve upon it before you even have a chance to make a dent in the market. Having something unique will almost always catch some attention.
Angel investors don’t want to invest in just anyone. By convincing them that you are a promising company with significant potential, and that you are passionate and invested in your product, they will be likely to invest in you.