My Advice to Startups Searching for the Right Investors
What Angel Investors Look for in Early Stage Startups
Do you have a great fledgling startup and are looking to make it a successful reality? At some point, you will need to raise capital in order to move it forward. When looking to raise money at the pre-seed or seed level, it is generally best to seek an angel investor rather than a venture capitalist. The reason for that is that while both angel investors and VCs are looking to make a solid return on their investment, VCs are often solely interested in ROI. Angel investors, on the other hand, are frequently willing to assume more risk. Angel investors seek to get in on the action earlier. They want “skin in the game.” They want to be involved. When an angel investor takes on your idea, not only will you receive funding, but you will likely also receive a mentor — one who may very much want to be a board member.
What Do Angel Investors Look For?
Most angel investors are seasoned entrepreneurs. They have played on the toughest fields and won. They thrive on the stress, initiative, and thrill of building a new enterprise. Nevertheless, while they are accustomed to looking at the big picture and seeing the potential of a great idea, they still need to see that your venture is backed up by a stellar team.
Having an A-Team
At the early stages of a startup’s development, evaluating a product or technology is not an objective science, rather a subjective or intuitive choice. Early stage investment places its bets on the team to a greater extent than the business model or the product. At this stage, a brilliant team is more important than a brilliant idea.
A high-performance team begins with the founders. Seasoned investors understand that only 10% of all startups scale and succeed so they look for people who know why they are in business and what problem is solved by their product or service. It is important to clearly articulate your goals. Show that you eat, breathe, and live your vision. Demonstrate your drive and resilience to succeed even in spite of setbacks.
Investors rely on the founders to have a realistic and clear understanding of how to lead and manage a team while shouldering the responsibility of the business. High-performance teams know how to disagree, discuss, listen, and resolve. Multiple viewpoints mean that fewer opportunities and obstacles will be overlooked. Your team will define your success and it is your most valuable asset.
A Winning Strategy
Every great team needs a playbook. Without a basic strategy about how to pitch your idea, the uniqueness or significance of it will not matter because it will fail before it is launched. No investor will put money into the game until it is clear that you and your team know the basic plays.
Tell Your Story
The first play is to tell your story in an interesting way. Engage your angel by weaving your story throughout your pitch deck. Highlight the problem that your business solves and how you and your team are qualified to bring it to market.
Outline a Business Plan
While you may not have all the answers to the big questions about your business, it is important to arm yourself with a plan that is thought out. At the least, you should come up with ideas for actions to take that will demonstrate your thought process, business acumen, and creativity. Angel investors will likely not be looking for the perfect or most developed idea. In fact, they may not be looking for it at all because it may indicate that you are too set in your ways and are inflexible. Angel investors frequently place a priority on looking for the right people who have an entrepreneurial spirit and sharpness of mind.
Set Firm and Realistic KPIs
Key Performance Indicators (KPIs) are a clear and effective way to see and understand what you have achieved relative to your business objectives. They are a good indicator of your ability to set goals and reach them. In addition, they show that you can be realistic and pragmatic about quickly recognizing any mistakes and fixing them. If you find that you have not reached a certain KPI that you have set and that you consequently decided to pivot or take the startup in a different direction, there is no reason to hide that from your angel investor. On the contrary, it would be best to explain the reason behind the change that you made since that truly speaks to your agility and ability to think on your feet.
Are You Coachable?
The best teams with the best strategies still need input from their coach. Investors may bring capital along with them, but they often more importantly have experience, which can provide your endeavor with tremendous value. This experience enables them to offer you feedback, guidance, and questions that will help improve your business.
When you step up to the plate to pitch for funding, remember that not only does your angel investor need to choose you. You need to choose your angel investor. You need to make sure that your angel investor is someone with whom you can work, someone with whom you can brainstorm, and someone you can trust. Why? Because they will be involved in your idea from the critical moments of its construction all the way until it takes form, hopefully goes to market, and scales. You do not want to get stuck with a bad match. A good fit between you and your business angel can be the difference between the success and failure of your business. It is the quality of the partnership that is key.