If you want to sail around the world, it is best to make sure you have the right people in your boat with you. The strategy is much the same if you want to start a company. Every start-up needs to find an investor, but it can be tricky to find a successful one.
Many investors are only searching for a fast return on an investment, and have nothing beyond cash to bring to the table. An angel investor is what a smart entrepreneur should be looking for. While many angel investors are not as flush as billionaire Bill Gates, they are instead inspired by making dreams come true for hard-working start-ups worldwide. Do you have a dream that needs a financial boost? Then the book, What Every Angel Investor Wants You to Know by Brian Cohen, will help you find your own angel investor.
Most people consider starting their own business at some point in their life, be it mowing lawns or starting a multimillion-dollar business. But no matter what the idea, they all have one thing in common: Start-ups need capital to get started. For most entrepreneurs, this means finding an investor. And if they’re lucky, they’ll find an angel investor.
An angel investor funds start-ups with her own capital in return for partial ownership of the project. Such a person typically possesses assets valued at over $1 million, has an annual income above $200,000 or a joint income exceeding $300,000.
Angels vary from traditional investors in that they provide a project with more than just cash. While it’s definitely true that angel investors write checks, by spending their time and sharing their knowledge and useful ties, they also contribute to your business. Angel investors have usually invested in many companies, and have gained plenty of experience in doing so. They will share their experiences with you and potentially save you from early errors.
Investors at Angel also appear to gather together. Having one who is genuinely loyal to you and your business concept ensures that you will also be exposed to other potential investors. Sadly, the main priority of many entrepreneurs is to secure funds as soon as possible. They also strike a deal in their hurry with the first investor that comes their way.
Note that a long-term engagement is your partnership with your lender. Think of your investor as your spouse: you’re going to be together for a long time and you’re going to share assets as well. Because of this, when things turn bad, you need to find someone who will not jump ship. You need someone who, through thick or thin, will stand by you and your company.
For individuals who are reserved, successful entrepreneurs have little patience. You have to get out there and speak with people, encouraging them to believe as passionately as you already do in your company. And you’ve got to try and make an angel investor believe even harder, as they’ve heard it all before!
In spite of their whimsical names, angel investors do not fall from the sky. You have to address them, and do so in a way that, on a personal level, appeals to them. You would need to be trained in order to do this. Do some research about your potential investor and learn some fundamental facts at the very least. What did they invest in? In prospective investment opportunities, what are they looking for?
Don’t ever come across as unprepared, or even worse, uninterested or simply lazy in your own project. You’ll want to get as personal as possible in approaching angel investors. Find things that you have in common, such as friends or interests, and as leverage, use these mutual experiences.
In approaching an investor, your goal should be to quickly hook them up. You have to believe any pitch is an all-in gambit. You either immediately excite them or they never want to hear from you again. For your first meeting, one perfect way to do this is to create a succinct elevator pitch. This is, in essence, a short version of your presentation, intended to catch their attention immediately.
Your pitch should be shorter than 150 words and last less than 30 seconds, but the particular problem that your product solves should also be stated. She’ll like to know first if you’ve taken along a parachute before an angel investor is ready to leap out of a plane with you at 30,000 feet. She’ll want to know specifically how it works, too.
For your company idea, the same goes. If you can clearly show how your company is going to work, an angel investor won’t take out her checkbook. As you will feel “on the spot,” you will need to provide investors with a lot of details about your business, otherwise they will not be persuaded that their time or money is worth your start-up.
Place yourself in their shoes. Will you fork over your own hard-earned cash to someone with a thin or underdeveloped business idea? Will you invest if the vision of an entrepreneur was to “make nice tables,”? Probably not. That is, unless he can explain how he manages to get ahead of the competition and how he’s going to persuade clients that his tables are the best in the world.
Investing, therefore, is a risky business. In reality, very few start-ups turn a profit, and angel investors realize that they will lose a significant percentage of their investments. But even if they do not eradicate all threats, by having as much information as possible, they can aim to mitigate it.
One way investors collect data is to ask you due diligence questions that aim to uncover any possible liabilities within your company. Be ready to provide data ranging from pending patents to recent power struggles between members of the team. These are questions most serious investors would pose, but it would be much better if you began the discussion yourself!
The mere fact that there are problems with your start-up will not destroy your investment possibilities. Every start-up, in reality, has problems. Being upfront about these problems will show that you are trustworthy, and will convince your honesty to angel investors.
Check out my related post: How not to be Disrupted?