Many billion-dollar business ideas never came to fruition. WHY? Entrepreneurs don’t want to go through the dilemma of sourcing for funds to get these ideas going. Finding financing in any economic climate can be challenging. For startups, it’s twice as hard winning the confidence of investors to invest their money for some equity in the company. Luckily for us, there are angel investors out there delivering financial miracles to worthy startup ideas. But that’s for young entrepreneurs who have the charm to attract these Angels in the world of business.
So, here is the billion-dollar question: Do you believe in financial miracles?
If you do, here are some tips on how to charm a deep-pocketed angel investor to finance your business idea.
1. Prove Your Expertise
The bulk of angel investors are people who have built their wealth from the ground up. They are fellow businessmen, and when they see the zeal in younger entrepreneurs like you, it reminds them of their early days. So, when you approach an angel investor, you aren’t talking to a novice but someone who has been there many years before you.
From their business experience, the first thing they’re going to judge you on is how deep your knowledge is about your startup idea. Ask yourself, How well have you researched about this project? You should be able to give convincing answers to all questions relating to the proposed project.
Although it is mandatory to know all the aspects of your project, we suggest that you research all the secondary factors as a whole. Things aren’t just black and white when it comes to investors, most times, they’re more interested in the grey. Keep this in mind the next time you pitch your idea to an angel investor.
These ‘grey points’ will get you the top spot in the investor’s eyes, but they’re not the only determining factor. There’s a lot more to a great idea pitch, but maintaining composure and doing thorough research is the first step to winning.
2. Pitch Like A Pro
Your idea might be great, but how you present it to the Angel investor matters a lot more. Pitching the idea is the most important factor that will decide if it will get funded or not.
If your pitch doesn’t excite the audience, you have already lost the battle. An excellent pitch must fulfill all of the following to a near-perfect extent;
- Balance business and emotional needs.
Whether you’re pitching to a company, an investor, a customer, or a potential partner, you have to hit them on both emotional and business levels. Without this, your pitch is almost certain to fall flat.
- A good pitch is succinct.
In most cases, you only have a few seconds to capture someone’s attention and get your point across. Focus and momentum are your friends.
- Tells a story.
Humans have been telling tales for thousands of years. This is why it’s a great idea for the flow of your pitch, whether verbal or in a slide deck, to follow a narrative pattern.
- Focuses on benefits.
Value beats price every single time. Rather than focus on cost or features, your pitch needs to focus on the value you’re going to create for the person you’re pitching.
The way you pitch your idea to potential investors also decides to a great extent the negotiation of the company share. While presenting a pitch, keep in mind that everything in your project doesn’t require funds, some require your effort and hard work, and the investor knows this too well.
3. Assemble an Alpha-Team
No matter how strong an idea you have, its potential to get funded by an angel investor ultimately rests on the shoulders of your team. Having qualified and presentable people in your core team is a necessity because a good investor will always be looking forward to meeting them. Some investors may even set the terms of the investment based on the potential of the team you have put together for the project.
Your team should comprise of some good speakers, tech experts, good market strategists and all. But most importantly, make sure your core team has people who can pitch and have a deep clarity of the project just like you.
It may cross your mind, from where the money would come from to employ these men. But this is a primary goal, and even if the workers are asking for a stake, if they are deserving, go for it. Think of it as an investment to grow higher and further, and set building a high-performance team as the priority, to begin with.
4. Don’t Deviate From The Dream
More than anything else, it’s about the real idea in which an investor will invest. To break the market open, it takes a rock-solid strategy, and you don’t even need to be a visionary. Potential investors would trust and believe in any ground-breaking idea, and that’s why they’re here. All angel investors look for revolutionary ideas, actual ideas that move people and work in the real world, and not some sci-fi theories. You should make the angel investor fall in love with your idea’s overall potential.
If you’re a futurist, that’s great, as you’ll always find investors who believe in your vision, even if the idea is ten years beyond our time. But be cautious not to go too far. Things are evolving at an incredibly fast pace. The probability of products that may not be needed shortly is rising. The farther you go in time, the riskier the venture becomes.
The angel investor like every other businessman wants to cash out his investment, and as quickly as possible too. So, make a plan that requires an ROI of no more than 5 years into the future. For a product that would take longer than 5 years to come to life, the chances of landing investment will significantly decrease. More importantly, keep your dreams close to your chest, do not lose sight of what made you go for this idea in the first place.
5. Be Modest
You seem to have hit the idea of the century, but that doesn’t make you a creative genius. Until your idea comes to fruition, talking boastfully about it will do no good. Be humble! You might be surprised that you aren’t even the first to have thought in that line. And it will shock you to find out how far others have gone.
Take it easy, and never compromise on research and extensive market analysis before you step in. It’s good to know all about it, but getting arrogant may not be a really good thing to do, especially when you are hoping to get some funding from an Angel investor. Understand that if there are a lot more investors, then there are more investments too just like yours. “Ironically, angel investors are human, too, so remaining humble and polite could be a big deal to crack the deal.”
6. Set Things In Motion First
Like I mentioned in my previous blog post, the greatest milestone in starting a business isn’t really how to secure funding but rather how to fortify your idea to be fail-proof. It’s best to do thorough research on your idea, evaluate its practicality, and develop a business plan, then you can worry about funding.
In essence, you shouldn’t jump the line to start sourcing for investors to fund your project. You can start small. Even better: you can start as small as you like. By all means, get things rolling. The further you are with the project, the higher the chance of getting a bigger and better investment. Investors want the project to work, and they wouldn’t hesitate to make the funds available if they see the right structures already in place.
Projects which are in the planning stages, and projects already in pilot or have created a customer base, have a lot of difference in the investor’s eyes. This is also proof that you are putting a lot of effort to make the project work.
Be sure you recruit the right people, as stated in point no. 3. A strong team is a big factor that is going to influence how the angel investor feels about your project as a whole. Also, reevaluate your startup costs. You may not need to raise as much money as you initially thought.
7. Keep Up With The Latest Trends
The distinction between tech startups and non-tech startups is that tech is fast growing and developing every day. Furthermore, tech startups are overcrowding the market. Every day, new technologies keep coming in and smart techpreneurs rush to build a product around it. So, you must keep up to date with what’s going on in the tech world. Investors are looking for people who are up-to-date on tech and can handle tech themselves. it’s always an added advantage to have a technology partner on your team. If not you, make sure that someone on your team has the coding skills, preferably the CTO, so that stakeholders will feel safe in the long-term robustness of your product.
8. Market Your Inspiration
As I mentioned above, the angel investor is also likely to be an entrepreneur. And just like you, some years down the line, they were also in search of money to fund their startup. So, if your vision happens to strike a chord with theirs, you might have your investor right in front of you.
Investors love visionaries, particularly those who remind them of their early days. Keep in mind all of the above points and start marketing your inspiration along with your vision. Inspiration is what distinguishes you from thousands of other businessmen pursuing angels to invest in their product. Make sure you give them something extra besides numbers and figures. Let your zeal and determination be your driver and let the energy resonate in all that you say and do.
Funding is an essential part of any business. As an entrepreneur, without the requisite seed capital, you might not be able to propel yourself to pleasant heights. Getting Angels to fund your idea is one of the many funding options that you should consider.
Year on year, the number of angel investors willing to dole out seed capital has been on the rise. In recent years, less-affluent investors have also begun to participate in angel investing via equity crowdfunding platforms. And that’s a good thing. However, more entrepreneurs are also looking at this option to fund their ideas, which makes things a bit more competitive. Besides, no good investor will just hand out cash to entrepreneurs with unrefined ideas.
So before you approach an angel group to seek for seed capital, make sure you are fully prepared. First, it’s important to do your homework and find an investor that shares your business goals. Then you can use the tips above to convince them that you have what it takes to make the project a success.