Photo: D. Sharon Pruitt via Flickr
Many startups as well as established businesses look for angel investors (or business angels) to fund their company rather than applying for a bank loan. As you definitely know, angel investors are individuals who provide their own funds to a private business owned by someone else who is neither a friend nor a family member.From the legal point of view selling and buying equity in the form of stocks falls under direct control of US Security and Exchange Commission. But angels also tend to co-own (or co-found) companies they invest into by becoming legitimate business partners. This is true for such forms of ownership as partnerships and LLCs. So technically, any individuals you persuade to take part in your endeavour and who is neither your friend, nor family member can be called an angel investor. And when you succeed, it doesn’t really matter if these individuals outline investing as their prime business and call themselves “angels”, or are just fellow entrepreneurs who look for business diversification.
So here are some basic tips you might want to follow to receive funding from angel investors (both “professional” and “amateur”):
Make you shortlist of angel investors
Outline the companies and/or individuals interested in investing in your business field. Obviously, a technology investor is not likely to consider your restaurant business plan. But even if you are a “technology” company, continue digging dipper into the specialisation: alternative energy differs from Internet business start ups (though they are both referred to as “technology”). And even those Internet start ups are diverse: social networks, payment systems, location based services, online gaming, mash ups are just to new a few. So make sure that your business project is within the field of interest of your potential angel investor. And only then should you shortlist him/her.
Carefully chose the way to first-contact
You have only one chance to make the first impression, remember? So think about the best way to establish productive relations with every particular investor you’ve outlined.
- If you are charming and good-looking, use it as your weapon and meet your future partners in person (at expos, industry events, meetups).
- If your project has a strong visual part, invest in brochures or any other (more creative?) way to present it. Many of your potential investors prefer visual information. That’s why a nicely crafted image will speak to them effectively.
- If your numbers are impressive (really impressive – not impressively overestimated!), then good old school Executive Summary sent via private mail will work perfectly.
Sound, look and act professionally
You’ll need everything stated above (personal charisma, nicely crafted brochures, professional Executive Summary) and even more (full business plan, good presentation skills, a descent business suite) to have your negotiations continued. You and your idea will be constantly examined and evaluated. So pay attention to details and do what you’ve promised. Being five minutes late for the meeting might not spoil everything, but will affect your general image as a reliable and professional person. Which is surely is not the result you aim achieving.
Keep your business plan presentation clear
Even having super-sophisticated technology behind the project doesn’t excuse making complicated explanations. Anything you present must be kept simple:
- visualise where possible (but don’t over-do it!);
- A void complex tables (better do several simple ones clearly explaining each point);
- Test the wording – even a school-grade should understand;
- Keep the logic – don’t hectically jump from one part to another; when questions from the audience are about to take you 5 slides ahead, promise to cover it a bit later, and then do stress you are answering the question while going through that slide;
- Provide handouts – when your presentation is over, make sure that you leave your audience with anything clearly describing major project advantages (but again don’t be to advertising-like, remember that you are doing a business presentation and not direct sales).
Your potential investors are (in the vast majority) highly professional, wise and talented business persons. And if your business idea is really interesting to them, they might want to contribute to the vision of this future project. Some of the suggestions will be really great and will help to optimise the project and avoid doing common mistakes. But some of the contributions expressed might change the very essence of the business venture and turn it into something completely different (which you might not want to be a part of). So do determine the role of angel investors before ever starting your negotiations and be ready to guard this line.
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