If you have decided that angel investors are appropriate, try to identify those who can help you. Angel investors will not have the financial resources to invest in all companies that approach them. Professional service firms and/or angel networks that work with private investors can assist you in the screening and selection process.
When to approach Angel Investors ?
When you have an initial good value concept or idea, but don’t hesitate to start this process early on. Investment takes a lot of time, so start to build the relationship early. There’s a lot of emotional rational behind an angel investment, so if the investor likes you and the team, they’re much more likely to invest and bring you more than just money.
You should approach investor only when your business is validated and reached a fundable stage. Investors spend a lot of time thinking where they are going to invest. Part of this work involves assessing whether a company is “fundable” given its current stage of development, traction and business plan.
What do they look for ?
Few factors which influence this thought of fundable stage are:
- The Idea: pitching something truly unique, big, and audacious, startups with ideas that seems crazy but if they worked, they’d be huge. A really cool technology with the “wow” factor or big enough to generate buzz amongst investors.
- A solid pitch: Involvement of clear and simple story, so that it is frictionless and can be circulated among the investors. A solid pitch should be polished and practiced Q&A. Example- how do I make a return on my investment?, why do I want to be part of this vision? etc.
- Startups growth curve: Investors recognize that the gap between a startup with “deal in hand” and one that “will have a deal, if we raise funding” is very large, and they use this gap as a filtering mechanism.
- Analysis of Common Mistakes: The most common mistake, is trying to pitch too early without any supporting proof / evidence / traction / metrics. Without any data, you tend to get a lot of false hopes. The investors at the end will say “let’s keep in touch”. The meeting then and there sinks.
How to pitch?
You should pitch by using a pitch structure that is universally accepted and readily understood by a very busy investor. You should pitch with a warm introduction if possible, a reference by someone whose opinion this investor respects. Otherwise, you will waste a lot of your energy and time and very few investors would have the time and desire to explain why they are not interested.
Rather than rushing in and asking them to invest in you the first time you meet them, spend time building a mutual relationship. And then finding out if they’re the best investor for you. Henceforth, get them interested in your business’s growth.
A good early prototype creates confidence in the investor’s mind. So always remember these few thing before you rush to the investor.
Related Read: How To Raise Money?
Investment takes time and it could take 3 months to finalize any deal and consider accepting. In fact, obtaining money takes so long that you typically raise for at least 9 months out just to have sufficient runway to process the next raise.