Our friend Jeremy Liddle, CEO Capital Pitch has provided this great post on angel investing for us to publish here on Techboard. To read more on Angel investors and angel investing visit Capital Pitch.
Young, new and even struggling businesses are always on the lookout for those opportunities that will change their company. They are tirelessly (standard for entrepreneurs) seeking ways to make their business stronger, more financially stable or opportunities that will take them to the next level. There are many avenues a new company can investigate in this search, and one in particular is making some noise.
Angels, as they are known in the business arena, are private investors who provide their own resources for companies looking to grow. The popularity of angel investors has been steadily increasing globally over the past 20 years. There is even a very popular television program centered on nothing but Angel Investors called the Shark Tank, although this show is NOT a good representation of how to value and invest in a startup! Pitching Angel Investors is not anything like it is shown on television. Despite that, there are some things we can learn from that television program and these are three approaches every company should consider.
- Show Financial Value
Angel Investors don’t achieve such a position by making bad financial decisions. What that means for the company making the pitch is a need to show investors what is in it for them. Make no mistake about it, investors are a great boon for the success and growth of small companies but this isn’t charity. For investors, the ultimate outcome they are looking for is a robust financial return. With every word, graph, chart and part of the presentation and pitch, the courted investor is determining the likelihood that the founder can deliver a positive return for the angel investor. Professional and sophisticated investors will rarely make irrational emotional decisions because you have a sexy product or special way with words. Whilst these items help, this is business.
- Personal Attachment
Now having made the point that the decision will likely be rational, there are irrational elements in the decision making process. This is the human connection which is absolutely essential in any angel investor’s decision. Like everyone else, Investors have “soft spots”, nostalgic feelings and other human cords/connections that can be addressed during a pitch.
Taking the time and effort to thoroughly do your homework on any potential investors can make the difference in the success or failure of your pitch. If your current company happens to be in an industry where a particular investor began or created their fortune, then there may be a personal attachment. Maybe your business is in a field where the potential investor’s parents created the family empire – personal attachment. Perhaps they grew up close to you, have kids at a school you live near, play the same sport as you or know one of your family members. These are only a few examples of how creating a personal attachment for an investor can help to build rapport and break down some of the rational decision making process.
- Future Outlook
It is no secret that many people who have built conglomerates and industry leading companies are forward thinkers. In the world of technology today, that trait is not only helpful, but absolutely required for success. That forward thinking, looking-to-the-future mindset can be very beneficial when approaching Angels Investors. For many investors, they have already built their empire, created their fortune and have established themselves as one of the who’s who in business. They are now on the lookout for the next generation of industry leaders whom, like Wayne Gretzky, have the vision to see where the puck is going to be, not where it is now.
It is not that uncommon at this point when these investors begin to look even farther ahead. For some it is about leaving a legacy, for others it is about future innovations and still others seek to empower and mentor future generations of owners. Painting a future portrait of what your company will look like in the future and how the investor plays a role in that can be a very persuasive angle.
More Than a Financial Resource
Understandably many Angels Investors are merely considered to be a private funding source, a type of financial aid. Failing to look past the financial investments (which are usually considerable) can be costly. Choosing angel investors that can also help you grow is a trait shared by the greatest founders. They will scour the ecosystem for investors that will add the most value to the company and carefully screen and select potential investors for alignment on vision, culture and exit ambitions.
Investors have often proven that they know how to build, develop and grow companies. They have shown the ability to tap new opportunities and apply excellent financial management skills. They should also have created a record of successful investments and the know-how to spot those opportunities.
A Happy Ending
Your experience as an investor or early-stage business may not be like the episodes on that television show, but the results can be. Finding the right fit for both parties is crucial as both will need to work with each other throughout the process. When the right Angel Investor and the right company meet, it is like a match made in heaven – just ask any Angel.
About the Author
Jeremy Liddle believes entrepreneurs change the world. He is Cofounder and CEO of CapitalPitch, a lead investor and platform to optimise investment in startups by combining an investment accelerator, venture capital and equity funding platform. CapitalPitch provides investors a curated source of emerging growth companies.
He is President for the G20 Young Entrepreneurs Alliance in Australia and works on youth employment and entrepreneurship with the United Nations, Global Entrepreneurship Week and B20 task forces. Jeremy is a Tedx speaker and author of the Book “From Idea to Start-up”.