Preparing for Angel Investment

A typical angel investor is approached by tens in some cases a few hundred entrepreneurs each year asking for investment. Many of these founders get turned down. Not so much because of the idea, but rather the founder (his/her domain expertise) and the expectations on the execution of the project.

Let me explain.

Sophisticated angel investors who have already engaged in a number of investments (and lost money), tend to have built over time a pattern for recognizing a good team. A part of the pattern will include evaluating the idea, market size, and determining how they can help through their rolodexes.

However, investors will always look first at execution and who on the team will make it happen. Who from the team is madly passionate about the product and the domain expertise.

Execution

In order to gain interest from strategic angel investors you must demonstrate that you and your team can execute. Clearly define the roles each of the members of your team play and explain why they will add value to your startup.

Include what has already been done and associate some data (metrics) to give the investor a point to start from. A typical investment into a startup does not happen over night. It takes a few months. Having given your angel prospects metrics on your first meeting, your chances of getting a second meeting are much higher if you are able to provide them a new set (growth) of metrics, included in an email invitation for a second meeting.

Sweat Equity

Some of you might say, execution hinges on a startup raising dollars in order to prove traction. How can I grow my team without the capital to pay new hires?

You are correct, early dollars are important to create a runway for your traction. However, these days, metrics are more important and so you have to be prepared to put in the early sweat. Put your nose to the grindstone and chip away at earning some credible traction and the strategic angels will follow.

Family & Friends

Finally, for those that are not able to bootstrap their business and/or attain enough R&D funding and grants, I suggest considering a Family & Friends round.

If you go this route it is quite important for you to understand and select specific Family & Friends to be part of your round. Choose wisely, and make sure they know that while this is a risky investment and most likely they will lose their money, there is a chance of an upside. Involve them in the process, not only with dollars, but with advice. You would be surprised how much you are able to learn from them. They might also introduce you to some customers. Throughout the entire entrepreneurial journey, listening to the world around you is key.

Originally published at blog.l-spark.com.