One of the main challenges that budding entrepreneurs and small startups face is the lack of the startup capital to finance the business. This is where alternatives such as angel investors come in. Angel investors are basically successful entrepreneurs who are willing to inject their resources into startups by other entrepreneurs. They are investors who provide financial backing for the small startups.
However, these angel investors need to be convinced about the feasibility of the business idea before they can pump their monies into the startups. Typically, entrepreneurs seeking the financial assistance of the angel investors make their initial pitch to the angels in an informal session. If their idea is judged to have promise, they may be invited to give a PowerPoint presentation followed by a question-and-answer session.
Generally, what angel investors look for in entrepreneurs are factors that reduce the innate risks in startups. Beyond that, they also look for the personal factors that increase the likelihood of success and decrease the risk, including domain experience and expertise, functional expertise, education, ability to listen, ability to learn, flexibility, and leadership.
There are various tips that such entrepreneurs may consider in order to maximize their chances of being funded. These include:
Preparation is everything for an entrepreneur seeking financial assistance. This means that extensive research on the business idea being proposed must be conducted. Investors will want to know why your product solves a problem or is a “must have.” One should therefore be ready to answer all sorts of questions, such as:
Who exactly is your target market?
How large is your market?
Who are your competitors?
Why is your product better than the others?
What is your customer acquisition strategy?
Is there a big enough market and customer base for the idea?
Entrepreneurs are often rejected due to overvaluation or the lack of a competitive advantage, so one needs to be careful in those areas.
A comprehensive business plan might come in handy. You should be armed with a business plan that includes a well defined marketing strategy and solid financial statements. You might also consider updating your business plan before contacting an angel. Be realistic. Angel investors are smart and will immediately dismiss your pitch if the numbers don’t add up.
Remember to project an air of confidence while making your pitch and avoid stammering or repeating yourself over and over. Confidence will send a message to the investors that you are sure about your proposal.
2. Be Precise And Simple
One of the biggest mistakes many entrepreneurs make while pitching to the angel investors is incorporating too much data and statistics. As much as the investors will want evidence of a market opportunities with growth potential, and that you will want to include the market size and analysis, don’t spend too much time on it. It’s more important that you convey a value-oriented, compelling and memorable message, so be precise and simple. Keep the slides to a minimum in case you are using a PowerPoint presentation.
3. A Strong Management Team
Investors will be looking at the entrepreneur as an individual and also alongside his or her management team. They know a bad partnership can ruin a business. Your partners and the team dynamic should therefore help inspire confidence, not raise questions. If angel investors sense any friction, they will fear your failure. It is therefore much easier to win over the investors if you have an experienced, seamless team. Illustrate your key team members and their strengths. Generally, entrepreneurs who build teams are more desirable than the extreme do-it-myself individualist. A good idea is nothing without good people behind it, and investors are fully aware of that.
4. Authentic Enthusiasm And Passion
Angel investors generally prefer entrepreneurs who are strongly and genuinely passionate with what they are doing or proposing. Therefore, let them see every ounce of the passion that drives you as an entrepreneur. Your passion will differentiate you in their minds because it’s an admirable character trait that shows promise. It makes a statement that you’re going to make your dreams happen with or without their help, and that will make them want to be a part of your success story. The passion and enthusiasm should nevertheless be genuine and authentic, and should not be forced because that would otherwise send a wrong message to the potential financiers.
5. Tell Stories And Use Pictures
Pictures are far more memorable than words. People tend to remember and retain a larger percent of information when the content is delivered alongside photographs rather than only verbally. Angel investors—like all investors—will want to see charts, graphs, tables and other slides showing the hard numbers behind an idea. The key is to break up the slides to give the eyes and brain a break. Tell stories and use pictures to compliment the narrative.
Engaging with the investors and developing a conversation that connects on an emotional level may also increase the chances of your startup being funded. You can tell a story that’s relatable, inspirational and addresses the marketplace problem you’re solving. Pitching is about understand what exactly the angel investors are interested in.
6. An Exit Strategy
Investors will want to know about your plans in case your business idea fails to take off or materialize. This is where an exit strategy comes in. As an entrepreneur, come up with an elaborate and well- detailed exit strategy to present to the angel investors.