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How To Find And Pitch To An Angel Investor

via The Telegraph: Dos and don’ts for small business owners who are considering angel investment.

‘There’s money and then there’s smart money’

Wendy Tan White, partner, BGF Ventures

The best way to approach an angel investor is through a warm introduction – one through a friend, contact, company or entrepreneur. Investors get a lot of inbound pitches, so it’s hard to qualify what’s a cold lead or not

Angels do attend pitch days and company-builder or accelerator demo days, but check the quality of the programmes, as well as the types of investors who attend. Determine if they’re a good match for you and vice versa. Angel syndicates such as Cambridge Angels and London Business Angels (now Newable) have special pitch events for their members.

Online platforms where angels invest in syndicates, such as AngelList and SyndicateRoom, and crowdfunding platforms such as Seedrs and CrowdCube have improved how you raise rounds from groups of angels. I would still recommend meeting some investors face-to-face so that you have a personal relationship where possible.

Finally, it’s important to have a lead angel or VC investor in your round – someone who will help set terms and provide some governance in the future. Remember that there’s money and then there’s smart money, where people will actually support and mentor you in building your company and flag potential pitfalls and opportunities.

‘Share why an investor will fit with you’
Kate McKay, associate partner and general manager for Scotland,
Galvanise Capital

We like to see pitch decks that are clearly validated – whether that’s using market research to tell us about customer size, competition and exit routes, or some well thought-out and realistic assumptions about financials.

A pitch deck should contain information on the problem, solution, team, competition, market, go-to market strategy, what the raise will be used for and, ideally, a slide on high-level financials.

Also give an idea of why you think that a particular investor will be valuable to you and a good fit with your business. Consider if you’re able to get value beyond the money – for example, through client leads, mentoring, operational advice and so on.

‘We want to know that your business can be scaled’
Jenny Tooth, chief executive, UK Business Angels Association

You should not approach angels when you’re just at the idea stage. As a start-up or early-stage entrepreneur, you need to approach them when you have built your business to the point where you have designed and initially tested the business concept.

Some start-ups focus too much on the detail of the technology, product or service, rather than on presenting the business opportunity and why you need the money to grow your business. You need to be able to tell a clear story – who you are and why you have set up this company.

We want to know the challenge that you’re addressing in the market or society, whether you have done your market research to show why your project meets a real need, and can bring something new or disruptive to the market.

We also want to know how you plan to make money and that your business model can be scaled. We will ask if you have tested it out on any potential customers – not necessarily having sold anything, but you have to prove interest and whether you have checked out your competitors.

‘Entrepreneurs who react badly to feedback are usually not investible’
Jackie Waring, chief executive, Investing Women

The working relationship and dynamic between an entrepreneur and investor can be as vital to success as the capital invested, so it’s important to get good people on board at the earliest possible stage.

Along with the personal qualities of the entrepreneur themselves, the reputation and perception of the people around them are among the key factors that determine whether an angel investor will support a business. No matter how good the proposition might be, it’s unlikely to attract finance if an investor does not have a good feeling about the people behind it.

Listen and take constructive feedback. While not every piece of advice may turn out to be suitable, it’s important to value and consider all the feedback that you get, as potential investors may have been through the process of starting and growing a business themselves – and many times over.

Entrepreneurs who immediately dismiss genuine feedback or react badly to it are usually not investible.

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