You did everything right: you gave your pitch and were truthful in describing your strengths and weaknesses. Yet in the end, when you asked if your investor was in, you got a “no.” What are you going to do now?
First, learn to appreciate a simple “no.” Doing so will save time and trouble for you both. Also, agree that not everyone wants to invest in your business. It is likely that at some stage you will hear the word “no,” but that is not necessarily a negative thing.
Many investors do not instantly offer a simple “no” as they are either unsure of what to do, want to keep their options open, or simply do not want to trigger a scene. Ambivalence would not benefit you in any event, as it forces you to spend time pitching to someone who is clearly not involved. In this state of limbo, you won’t ever want to find yourself. Therefore, with equal grace, you can press for a simple “yes” or “no,” and embrace all possibilities. While you’re likely to find another investor, you’re never going to make up for lost time, so try pressing for expediency.
If you’re lucky, a “no” can be a good thing sometimes, too. Some investors will take the time to clarify why your plan has been rejected. Listen to the suggestions carefully and think about how in the future you can improve your pitch. An investor could tell you, for example, that the price of your product is too high, and that she won’t invest in your business because doing so might cause problems with her capital structure. Knowing this, to reduce your price and make your idea more viable for the next potential investor, you may make changes to your business plan. Don’t fear asking for suggestions! This will awaken the instinct of your prospective investor to help and could lead to some concrete insights.
You also have nothing to deal with while a start-up team is pitching to an angel investor, except your business plan and your own personalities. But you’re going to have to make the most of both, and that means showing that you and your team have the right personalities! Angels believe in your promises you make and keeping your pledge credible means persuading them of your honesty. Investing is a risky business, as you already know. Regardless of how much market research you’ve done, it all comes down to how much trust the investor is able to bring in you in the end. You need to make it your mission, beyond all doubt, to persuade the angel investor of your integrity.
Simply being truthful with who you are is an important aspect of showing honesty. If you’re from New Jersey, don’t try to talk like you’re from Silicon Valley. Be honest. They’re not interested in where you come from or how you talk. They want to know that you can be trusted by them! But faith alone isn’t enough. Without really believing you have the expertise to execute your idea, an investor will trust in your idea and your honesty. In other words, investors must see that to the bone, you are an entrepreneur.
It is important to show that, even though it ended poorly, your team has had entrepreneurial experience, as it demonstrates that you have already gained some management skills. Finally, you will have to prove that your team can actually operate as a team.
The backbone of start-up projects is teams. Their willingness to share responsibilities and cooperate with each other can mean the start-success up’s or failure. The author himself looks for teammanship when determining whether to invest, a broad concept that defines when a founding team is united by the same vision, whereby each member gives their all to accomplish mutual objectives and overcome disputes.
It needs you to find the right balance between dreaming big and keeping your feet planted firmly on the ground to attract an angel investor. A collection of values that motivates the development of a product or service is behind any start-up. Of course, wanting to make money is an important aspect of entrepreneurship, but there should be something deeper that drives you in the way you want to improve the world, your own little piece of reality.
You convince a potential investor that your project has substance by showing your confidence in your company and that you will work hard to bring it to life. However, if you don’t back up your vision with a solid action plan, a plan too big could make you sound like just a dreamer. Indeed, you’ll want angel investors to show them exactly how you intend to make your vision come true.
Don’t overlook information such as profit margins or bank loan management. Although such things are not as thrilling as considering your vision, bringing your vision to life requires them.
One of the best ways to get an investor interested is to illustrate that you’re dreaming about an exit strategy. Start-ups have two exit strategies: being acquired by a larger business or going public (although going public is exceedingly rare for young companies).
Having an exit plan means that you have already found a target company that would be interested in buying your start-up, and that you have established the requisite conditions for the purchase to take place, such as having clear and structured financial records. For an investor, an exit strategy is one of the primary motivators for why she would want to invest in your start-up in the first place!
In exchange for her contribution, an angel investor also holds equity. Consequently, if the business is bought at any stage, basically the only way for an investor to potentially make cash is. Investors are in the game to make money, much like entrepreneurs. Therefore, as confirmation that you still take their needs into account, it is natural for them to want a straightforward exit plan from the outset.
It is true that the majority of start-ups end up failing and that most investments do not turn a big profit as a result. The pursuit of a return, however, is nevertheless the only rational motivation for an investor to invest, no matter how much they believe in your vision, and you should not ignore it.
For a founder, a start-up is like a kid they have brought into the world and they expect to change the world for the better through it. But for an investor, even though she takes an active role by advice and advising in shaping the business, the start-up clearly isn’t hers. So in the end, every investor is investing with the hope of cashing out. You should show the investor that you understand this and that you’re working to make this possible!
Angel investors do not only write checks, they can also have powerful insights, expertise and networking opportunities for start-ups. Grabbing their attention means meeting them on a personal level and developing a business that takes the needs of customers into consideration.
So be clear as to what the cash is for. Get detailed on how the money she would give you will be used while you’re pitching to an angel investor. Is this for wages for employees? Growth and research? Or completely anything else? This will not only prove that you have business sense, but it will also help the investor feel the difference that she makes. No one, after all, wants to give you some money to pay for your bank loan!
Check out my related post: How to create a pitch deck from the mindset of the venture capitalist?