To take advantage of angels, you have to understand what they’re looking for and what they expect. You have to give them a reason to want to help you. Here’s what you need to know and do:
Offer the possibility of a high return.
An angel is not interested in investing in a mom-and-pop office supply store. He or she likely will be much more interested in “momandpopofficesupply.com.” But it’s not just high technology that opens an angel’s door. It is the possibility of monumental growth and thus monumental return on the angel’s investment.
If you expect your new or growing business to have revenues expanding at 10 to 15 percent per year for the next few years, few angels would pay attention. If you have a good idea for a special business, or your company is poised for exponential growth say 20 or 30 percent a year for the next few years then you might keep an angel’s attention.
Angels make risky investments. Most ventures they invest in fail. So they need a big return from the successes.
Go to the right angels.
You won’t find them in the Yellow Pages. You’ll find them by networking, by asking business associates and financial advisers, by going to networking club meetings. Often, angels invest in what they know. Some only invest in high-tech companies. Some only invest in certain industries. Don’t waste your time with someone who cares little about your business or industry.
Make your pitch.
You must have a thoroughly researched and well-written business plan for your startup or expansion. The plan should detail why your company has the experience, customer base, or market expertise to succeed.
Hugh Mackworth, an Oregon entrepreneur and founder of an angel network in Portland, says he advises entrepreneurs to have different verbal versions of that plan ready in one-minute, seven-minute and hour-long spiels. Be ready for angels’ various attention spans, he says. Sometimes, you have to get their attention very quickly. Also be ready to get your point across in other ways with videos or Power-Point presentations, for instance.
Angels often look for something beyond the business plan to impress them. It might be the extraordinary management team you’ve put together for your startup, or a very good board of directors or board of advisers for your existing company. Or it may simply be mentioning another angel or venture capitalist or entrepreneur who’s invested in your company.
Know their long-term expectations.
Angels can be helpful in ways far beyond their money. Many have business and entrepreneurial experiences that can help your company avoid pitfalls that many beginning or growing companies fall into. Many angels are willing to watch quietly as their investments grow as the company does well. But some will expect more than a good return on their investment. Some will expect, for instance, that you be willing to bring in a top-flight chief executive officer if the company does very well that you will give up some control of your own company. So know everyone’s expectations at the start to avoid those that are unrealistic or don’t match your own.