The early stage funding ecosystem can feel daunting. Everyone tells you the same thing - sourcing angel investors for your startup is a critical step in finding success, and they’re right, but it’s also a tricky one if you’re unsure on where to begin. From networking in the right circles, to navigating how to make your business stand out from the rest, there’s a lot to do and likely not enough time to do it when you’re trying to grow a startup.
So, we’ve put our heads together here at Valhalla Angels to summarize some of our top tips when it comes to attracting angel investors, with some handy hints on what not to do.
Research: Find Your Targets
A common mistake business owners make when searching for startup funding is preparing a blanket pitch and releasing it to the masses. Think of it like applying for a job, you can’t just send a generic CV to every company in the city and hope for the best - you need to do your research, find out what makes that company tick and how you can best sell yourself to them. Sourcing an angel investor is no different.
Put in some time for researching potential angel investors that would be a good fit for your business. Find out what businesses the angels work with or have worked with in the past, learn about their professional history and their typical process for investing. With all of this know-how you can determine whether the angel is the right fit for you and vice versa before contacting them with an impressive, personalized pitch. At the end of that day, it’s all about making sure you and the investor are on the same page from the get go.
Prepare: It’s True What They Say
We’ve heard it a million times before, from our grade school teachers, our parents, our bosses - fail to prepare, prepare to fail. Never has a truer phrase been said, we mean it. The first thing you put in front of an angel should be a tailored pitch and a solid business plan. Don’t come to them with a half-baked idea, they want to see proven business models, prototypes, learn about beta-testers or first customers and more. Your plan needs to show effort, care and detail, and even cover things like your exit strategy, so the angels can quickly visualize their return without having to work it out themself.
Angel investors receive countless pitches, so it really comes down to how much work they will need to put in determining whether this is a viable partnership. When writing your business plan ask yourself this:
- Have I answered their most important questions at the start of my document?
- Will the angel have to search for any extra detail?
- Are there useful links / contact details for more information to save them time?
This is the first thing a potential investor is seeing from your business, so use it as an opportunity to make a good first impression for how you do business. Demonstrate effort, strategic thinking and anticipate their questions so no stone is left unturned.
Networking: It’s Your Best Friend
Network, network, network. That’s all for this tip.
We jest, but it really is that important. Attending events, either in person or virtually depending on where the world is at, can get you in front of the right people at the right time. Prepare your elevator pitch and get ready to deliver it when you meet the right person in the crowd. If it’s not appropriate to be pitching, be sure to make a stellar first impression, exchange contact details and follow up as soon as you can with a pitch that references your previous conversation.
There are also plenty of online forums out there where angel investors hang out anonymously, as well as a host of angel investing groups that connect startup founders with angels - connections are gold dust. Take Valhalla Angels for example, we’re a community of Canada’s top angel investors with a diligent screening process for the best deals, excellent networking opportunities, and education and support to those new to angel investing.
Pitching: Knock their socks off
There are two types of pitches you need in your back pocket. An engaging elevator pitch that can attract initial interest from investors and a more detailed pitch that demonstrates your knowledge of the competition, your business and financial model, your background as an entrepreneur, product and pricing information and regulatory and legal aspects of the business.
- The elevator pitch: This needs to be a powerful teaser of what partnering with your business will look like for the investor. Show them this is not only a fiscally sound decision with great return opportunities, but the chance to work with an innovative company and an entrepreneur they want to do business with. Cover off what your startup is, how it’s different from anything else on the market, who your potential customers are and where the returns are for the investor.
- The intensive pitch: This is where you need to hit them with hard stuff. Numbers speak louder than words, so get all the necessary statistics and market data in there to show the angel you’ve done your research and you know what you’re talking about when it comes to your business and its relevant industry. Not only that, but go into this process ready to make a deal - have everything you need to answer an angel’s questions. The last thing you want is for deal momentum to slow simply because you need to go back and fact check.
- The pitch doesn’t matter: We know, we just spent a long time telling you to prepare a good pitch, but we’re adding this in to take some of the stress out of the process. It feels like everyone is judging you when you pitch, whether your idea is a good one, if you know what you’re talking about and the list continues. But here’s the thing, no one is going to write you a cheque because your pitch was amazing. What they will do is use your pitch to decide “is this someone I want to hang out with” and “do they think the way I do about the world”, and finally “can this person move from start up founder to business leader.”
Time: It’s a Waiting Game
Parting with capital is a serious decision for angels that requires research, evaluation and thinking time, so give your potential investors time. Avoid the urge to follow up too often - you want to be remembered as the person with the great business idea, not the person who won’t stop emailing.
All in all, it can be challenging to find angel investors and disheartening to receive rejections. The most useful advice we can give is to expect that rejection at first, plan for it and seek out feedback so you can make the next pitch, the pitch.
Did any of these tips help you out? Let us know in the comments below or Tweet us @ValhallaAngels!
Valhalla Angels is one of Canada's most active angel investment groups since 2003 with member locations in Calgary, Edmonton, Kelowna & Vancouver and recently adding Saskatoon and Regina