How to Win Over Angel Investors
If you’re an early-stage startup entrepreneur, and in need of external funding, odds are that you’re looking into angel investors that are worth reaching out to. In doing so, it’s important to bear in mind that it’ll take a lot more than a good one-liner to get them interested in you and your product. Angel investors are regularly hit with hundreds of pitches, and what they need are insights that are beautifully laid out in order for you to stand out. The inability to answer the questions of angel investors and articulate your idea decreases the likelihood of receiving funding significantly.
The initial approach plays a key role. According to Rip Empson,
“While some VCs are market-focused and others are entrepreneur-first, obviously if you want to build a billion-dollar company, you’re going to need both. However, when it comes to the successful entrepreneur, the common perception the required ingredients include being hyper intelligent, a big ego, vision, and a fundamental ability to be experimental, focused, and passionate. While these are all essential to the equation… the traits that really matter most are authenticity, integrity, and motivation.”
In a nutshell, this means angel investors expect no-frills insights about you, your product, your team, and the space. Out with the buzzwords, and in with the knowledge that proves you’ve done your homework.
Here are some points you must bear in mind:
Investors will ask lots of questions, first and foremost expecting you to address the main details around the company itself. Let them know the primary function of the company, why it is unique, and the problem it solves. In that same vein, how big is this market opportunity? You will need to show investors that the market is still meaningful, and the percentage of it you plan to get.
Once the basics are covered, your management team will need to be introduced. It’s important to convey that you and your team are passionate, dedicated and experienced. For example, what motivates you and your team, and how do you plan on scaling the team in the near future? Are any of your team members influential in certain areas? Perhaps they have ties with glittering contacts that will come in handy in the future?
Now circle back around to your product, and start delving into the specifics, such as why consumers would and should use your product or service. Lay out your product milestones concisely, including planned features. If possible, demonstrate that your product works in the described manner. Wow them with its ease of use, and potential.
Every market has competitors, and telling investors you have no competitors does not instill confidence. So in order for them to invest in you, tell them about the competitors to your company, why your product has an advantage and disadvantage, and how you plan to compete. Even better if you can list out indirect competitors as well.
Explain your long and short-term marketing plans, costs of customer acquisition, and typical sales cycles. Also include early traction the company has gotten, such as site traffic or app downloads. If you have a strategy or campaigns set in place for social media or even paid campaigns, share details on those as well.
Now this is one of the most important parts for investors: you current financial situation. How much equity and debt has the company raised so far, and what are your three-year projections? What are your profit margins and would future equity and debt financing be necessary?
The data isn’t everything. Presentation can move your audience into favorable moods, increasing your odds of getting an investment. A very effective and popular method is to use storytelling. When you tell a story, it is scientifically proven to hold an audience’s attention and memory. You can deliver all your information via storytelling, allowing you to present it in a more attractive manner. However, make sure not to make your pitch too complicated. Don’t try to get too fancy with it; as long as you hit the key points, simple language works the most effectively. Keep it concise, not too short and not too long.
Within your pitch, pepper in a few deadlines here and there. Successful businesses run on deadlines, and showing that you have incorporated them already shows investors you are serious about the project.
If your product/service has already made sales or gotten downloads/sign-ups, mention it. Make it a point to mention the numbers and the timeline within which they were sold. If possible, show future plans for them to see.
Choosing the right audience for your pitch is crucial as well. If your investors have no interest in your product, what’s the point? Research the backgrounds and interests of your investors, and recognize which of them would be willing to invest in your company.
A business pitch is all about convincing investors that your vision will succeed if given the funds. Let them know that their investment is sound and the potential is limitless. When you have mastered a truly successful pitch, it’ll make all future presentations feel like a walk in the park.