Seven tips on how to hook an angel investor for your startup
Angel investors are a valuable source not only of investment but support. We found out what they look for in supporting startups
Abu Cassim co-founded and runs Jozi Angels, an angel investment network in South Africa. The group of 24 angels has made 38 investments over the last five years in Johannesburg and Cape Town, ranging from an average R700,000 to R5 million. Cassim also owns and has previously founded several other companies in the entrepreneurial space. This gives him extensive know-how on just what makes a match between a company and an investor. He shared some perspectives in a recent session with jamlab accelerator teams.
Funding for startups can come in various forms, from private equity to grants. Angel investors are similar to venture capitalists in that they may both take equity and possibly a seat on the board, yet they are unique in that they are usually an individual or a syndicate investing their own money as early-stage investors with personal preference in the type of startup they chose.
At the core of this are three things the angel offers, according to Cassim. He says, “it’s the knowledge, the networks, and the capital, and it’s in that order of importance.” While it is easy to mistake the investment for pure financial involvement, the three are crucially linked. Cassim continues, “the knowledge helps with decision making, the networks help with opening doors and you’ve got to have all three working together to actually be of any real value to a company.”
When considering whether your startup will be attractive to an angel investor, Cassim lists seven things to look at and strengthen, regardless of your startup’s particular scope. They are the team, innovative solutions, market opportunity, market-solution fit, personal fit, traction, and return on investment (ROI).
Firstly, Cassim says that his experience has taught him that a great team can be a better investment than a strong idea. “The team is the most important thing, but it is also one of the most difficult things to assess.” He looks out for the right skillset and expertise to get the job done well. Passion, drive and a ‘never say die’ attitude are just as important, and Cassim finds that someone who is both talented and hard-working is usually his best bet.
Secondly, your concept is crucial. Cassim looks for solutions that are unique and different from what is already out there, and for startups that may have intellectual property that can be leveraged.
Thirdly, there needs to be an opportunity in the market for your idea. Cassim says to ask yourself “how big can this company get and can the solutions scale to service the market that you are targeting?” The solution needs to connect to a problem that exists tangibly and address it adequately.
Another important factor is that there needs to be a good fit with the angel investor. Cassim explains that this is a strategic partnership that relies heavily on a strong relationship. He says that startups looking for funding should start here, identifying possible angels and working your way towards building a connection with them, perhaps through an initial contact in-person or on platforms like LinkedIn.
He receives over a hundred applications for funding every week and says that “you’ve got to realise that you’re going to get a lot of no’s before you get the yes, but you only need the one yes.” Cassim gives the example of an entrepreneur that he calls on his daily drive to work, showing that putting in the time and effort can result in a supportive and helpful relationship.
Lastly, angel investors do of course also need to look for a possible return on investment. Cassim explains that this is not always financial, although the numbers are important. There may be other forms of positive impact to consider, and the investor may also think of what sort of exit strategies there may be eventually.
If you’re a digital media startup that is looking for funding, consider an angel investor that would be a good asset to you in terms of their knowledge, networks, and capital. As you work towards a strategic partnership with them, make sure you have a strong strategy, from your team to possible ROI.