How to Close an Angel Investor

I had a conversation today with a member of Eben Pagan’s team …

…for those entrepreneurs out there who don’t know Eben Pegan – he has helped entrepreneurs with various courses such as ‘Ignition’, ‘Guru Mastermind’ and others. Certainly worth checking out

….and look Ma, no affiliate links to Eban! I’m just glad to point you towards him – he can help…

So, for whatever reason, the conversation got me thinking about the very first time I went through the angel investor process and how, after quite a few months, I managed to close my first group of angels…

When I set out to raise money I was passionate about my business…you have to have that burning passion because it sees you through the lonely nights when no one loves your business or you…its the fuel that keeps you going even though you are inwardly cackling to yourself with insane laughter, giggling to yourself like a sleep deprived child (probably because you are very likely to be sleep deprived through self imposed highs, lows and Titanic sized pressure….)

…but here’s the strange thing….

…even though I was passionate about my business…even though I could see the world where my business would exist and where it would dominate the four corners (?) of the globe…a small part of me wondered if I would ever get the money we needed. Could I really get someone else to see the same world as me?

Who did I think I was? J. R. R. Tolkien?

The other interesting part of the equation that caused an extra few months of delay in closing my angels was the master / slave dynamic that I felt between me and the investor’s position and our negotiation…no, nothing kinky intended!

And do you know what too little sleep, too much Starbucks coffee (can anyone say free temporary office…), combined with never having been through the process before and feeling like the weakling in the relationship equated too?

…months of jumping through hoops…answer another set of increasingly obscure and inane questions for some who shall remain nameless…and having the process drawn out past the achievement of some key milestones which almost mitigated the need for the investment in the first place.

So here’s the conclusion I came too today after talking to one of Eben’s folks – here’s the two part answer that would have saved me months in the fund raising process and would have got my company growing much faster, much sooner….

Here’s the two part answer to “How to Close an Angel Investor” that would have saved me months:

How to Close an Angel Investor in two Simples Steps:

1) Find someone who had been through this process repeatedly and have them guide me

2) Ask for the Investment (or more accurately, know when you’ve answered enough questions and when its time for the angel to put up or shut up…and yes, I do mean that!)

Again…

Find someone that can help you through the process and LISTEN to them….

and ASK for the decision.

POINT BLANK.

No ifs, buts or maybe’s….what do they want ‘guarantees?

…and if the answer to that is ‘Yes – they’re asking for guarantees’ – tell those investors ‘types’ to go to Hell!

Case closed!

“But how will I know when to ask?”

Hold it a sec…perhaps you are asking yourself… “When will I know when its the right time to ask for the deal?”

This is how I predict the conversation is likely to happen…

…they’ll ask interested questions during your first presentation…they’ll sit forward, be engaged and will probably spend some time reviewing your documents before a second presentation.  All good right….

Then you’ll have your second meeting – they’ll come up with better questions and you’ll need to dance your way through them – assuming they’re still smiling, they will probably suggest a day or two to think before they talk or meet with you again…still good…

During the next chat or meeting – they will tell you they need more data or they need to see some progress in a particular area – perhaps achieiving an additional milestone.  The distinction between these two requests is HUGE!

Let me let you into a secret – if they are asking for more data then they’re still interested.  At this point, ask them – “Is this a full list of all the data you’ll need to make a decision?”

…and don’t panic – pushing for the close in a gentle way is a good thing. You’ll need to demonstrate that ability to move a deal forward otherwise you’ll not be able to get customers.  They’ll respect you for it as long as you don’t beat them over the head with your pushiness…

So, having asked that question…they’ll smile and if they assure you it is all they’ll need – go get that data…

If they ask you to make more progress, this means the investor has either decided to ‘pass’ i.e. not invest, or they want to further reduce their risk. This puts them in the ‘follow up later’ category. They are unlikely to invest so decide how many more cycles to spend before you focus your efforts elsewhere.  I would go find someone else in your shoes but that’s your call.  They will probably not become investors.

But before you walk out with your tail between your legs – here’s a piece of advice that could be worth the $500K you go ahead and raise…

Angels tend to invest in groups. Most entrepreneurs raise money by bringing a few angels together.  What does this mean to you?

It means the angel you are talking too probably knows other angels.

So – after this angel has either told you ‘No’ or “maybe later” – ask them for a referral.

A simple “Out of interest – are there other friends of yours that might be a good potential mentor or angel for us? We would really appreciate you helping connect us….”

Again – its all about not being afraid to ask…they will respect you for it. Promise!

…And here’s an example of asking…

I want to build a relationship with you…

Sign up to my list – get the free Venture Capital checklit on the right and join my RSS feed. AND add a comment.

See – wasn’t so hard…

Let me know if I can help you as you go through this process.  Assuming I have the bandwidth – I’d welcome the opportunity.

Best of luck

Andrew

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