Can you imagine what it must be like for an angel investor listening to a founder deliver a terrible pitch?
This Angel has probably worked hard all their life to get themselves into a position where they can help to fund the future. They have spent most of their waking hours working for the man, and when their head hits the pillow at the end of another long day, they have dreamt of backing the next big social media platform.
Or a new technology that will make all our lives easier; a simple yet disruptive solution to an age-old problem. A breakthrough medicine. An exciting Fintech or Fashtech play.
In short, investors shouldn’t have to suffer fools gladly. So here are 5 things you must have already done before you pitch to an angel – because if you haven’t, you are wasting the investors time, as well as your own.
1/ Have a crack team / have experience of running a crack team.
Read any guide to startups written by a wise investor or startup mentor that has been around the block a bit and they will tell you that any startups’ success is 99% down to the strength of the team.
Great ideas are ten a penny – great teams are not. Are you a leader? If you are, don’t wait for an angel’s money before you start to think about hiring. At worst, you should know exactly what you are looking for in terms of staff; a loyal 2ic, an inspirational coder, a creative genius etc. etc.
At best, they should already be in place.
Never, ever, give a potential investor reason to think you have issues with another team member. It’s startup suicide.
2/ Know your financials inside out
There’s a good chance an angel investor won’t be familiar with your industry sector, market, and what your rivals’ numbers look like, but they will still be looking for signs that you know your numbers better than a child genius knows his times tables.
There are ways of asking tough questions even when you are not familiar with the minutiae of the subject matter – expect an angel to do just that.
Whilst angel investors aren’t completely profit driven, and may invest for all sorts of reasons, a successful product generally results in profits, and no angel worth their salt will let you get away with a vague set of projections – even if, a few years down the line, those projections turn up to be well wide of the mark.
3/ A realistic set of milestones
Every journey can be, and usually must be, broken down into milestones, and the same goes for your startup’s journey.
Avoid being generic – don’t look milestones up in a lean methodology text book and trot them out in front of investors as if they are attending their first ever pitch and have never come across a product quite like yours before. This will result in them feeling patronised and, politely making for the door.
Do take the time to consider where you are starting from, and what you must achieve to realise your goals. Make them relevant and tailored towards your enterprise. Do you need to reach 5,000 users within 3 months if you are launching a private jet hire app? Unlikely.
Do you need to start your first marketing campaign before you have achieved that elusive product market fit? Nope.
The milestones that you set out to achieve will be completely different, and reached at different times, than any other startup. It can be healthy to draw comparisons with rivals, it can even be healthy to miss milestones altogether provided there is a good underlying reason why the milestone in question is no longer appropriate.
But at the very least, you must not have milestones for milestones’ sake. They must be meaningful, measurable, and achievable. And they must make the overall journey easier, not harder. They are always, remember, subservient to end goal of your business.
4/ Have All Of Your Ducks In A Row
This sounds like filler, right? It isn’t.
To an extent, an angel investor wants to be presented with a “fait accompli”. They don’t want to have to dot your I’s and cross your T’s for you. Have you registered a company? Have you applied for EIS / SEIS eligibility? Have you checked to see if your startup will be eligible for R&D tax rebates.
Do you have a 5-year plan? Have you studied other companies in your space? To reiterate,, ideas are all very well and good, but a good team, that can execute quickly and well is what counts.
Are you ready to start executing? If you aren’t, should you be speaking with investors? An angel will only come on board when the business is ready to move forward, and they know exactly how, and when, their money will be spent. It is better to have too much information, and use it wisely, than to have too little, and to have to be repeatedly saying “I’ll get back to you on that”.
5/ A Great and Warm Relationship With The Investor
Brilliant, you have a meeting with an angel! Just think of all that lovely money they will sign over to you and the smile on their face when you deliver them a juicy Series A valuation.
This is not the right attitude to have. Again, it isn’t all about the money. Investors fund projects because they are curious, they want to try something new, and because they are, by and large, good business people.
They are not there to hand over big chunks of money and then disappear until it is convenient for you to see them again.
From an Angel’s perspective, they are not giving you money to spend however you see fit, they are buying a piece of the pie – a chunk of the business – and that gives them rights.
If an Angel invests with you, it’s because they think that they can work with you and become a part of your project.
Therefore it’s important to cultivate an excellent working relationship with an investor, or they won’t invest. Don’t try to fake it – don’t make out like you think they are the best thing since sliced bread when all you really want is their cash.
Business is about people, not money, not even ideas. A business only works when everybody is pulling in the same direction. If you are not hitting it off with an angel, don’t accept their money under any circumstances. The chances are, if the personal warmth is not there or is not genuine or mutual, they won’t invest anyway.