Angel Investor | The Funding Guru

How do I find an Angel Investor?

On March 2, 2010, In Angel Fund Raising, How To, Offering Help, By Andrew

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Perhaps the most common question I get asked is “How do I find an Angel Investor?”

Unfortunately they’re is no easy answer like…”Go to this site, sign up and voila, choose an Angel Investor…”

Actually – that’s not exactly accurate, there are two sites that come to mind – The Go Big Network and Funding Post - you should check them out…

I seem to recall some data from somewhere that the majority of Angel Investors invest with a 60 mile radius of where they live – perhaps its an urban myth but that sounds about right to me because, after all, many angels like to be close to their investments so they can get involved to some degree.

In my experience, Angel Investing tends to be on a regional rather than an national or international basis – take that into consideration before you stump up your hard earned cash to sign up to a broad brush internet service that promises to deliver handfuls of Angel Investors like an endless beauty parade – probably not going to happen unless you live in a few areas where they have high concentrations of angels…i.e. New York, San Francisco and perhaps Boston. And if you do live in such an place, why do you need to use a website service anyway – just go hang out at your local coffee roastery…

One point to make is Angel investors (or accredited investors) are defined as:

“a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;

a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year;”

For the full SEC Definition which includes all definitions – go here

…but one point I’d like to make is you can see from the two key definitions above that angels are not that rarified a set of individuals – you could actually be living next door to one right now or perhaps have spoken to a few over the last few weeks or months during some social event. That’s a critical point – in my not so humble opinion, one of the best ways to find an angel investor is literally through networking – so where would I hunt for angel investors?

Here are a few ideas:

Angel Organizations – Angel investors are becoming more sophisticated – once upon a time they looked for investments as individuals and thought of it more as a hobby than anything else – this view of a typical Angel is evolving, to the point where they are increasingly joining together into angel investment groups and have processes and procedures for evaluating investment opportunities. The Band of Angels is one example of this…(Here)

Investment Forums – In many cities, states and countries, there tends to be investment forums – they can be supported, driven or funded by a local government of some kind as a way to encourage new businesses in their regions. Typically they’ll bring together investors, professional advisors and potential customers and encourage young companies to make their presentation. Here’s an example of one investment forum in Connecticut. You’ll probably find one close to you if you do a quick Google search.

Venture Capitalists – Venture capitalists tend to invest in companies a little further along than those considered by angel investors – therefore if you are looking for an angel and have any venture capital relationships, consider reaching out and asking them if there are angel investors they can connect you with – you’ll be surprised with how both investment groups cross-fertilize and help each other out with exciting companies.

Incubators – Incubators are not exactly angel investors but they can often provide many of the resources a young business will need for less than a startup would typically pay – also incubators tend to have good relationships in the startup and therefore investor community. If you are looking to start or grow a business, take a look at an incubator near you and if you hit it off with the folks over there – consider asking them to refer you to a friendly angel.

Other Angels – when you talk to one angel, ask them to refer you to other angels. If they decide not to move forward or if you decide not to move forward with them, keep it friendly and see if they will still refer you to other angels that might be a better fit – obviously this requires some diplomacy but Angels that have been investing for a while tend to sit on boards with other angels and their angel network is probably quite extensive.

This post could have gone on for another ten thousand words or so and I tackle some of these elements in the supercharger course (here) but for now, its time to tie a bow around this brief “How to Find An Angel Investor” introduction.

I don’t know about other writers but the greatest gift I can get is your questions and comments – so if you appreciated this posting and / or have comments or questions or want me to go into more depth – send me an email or add a comment to this posting.

The critical point to remember when looking for an angel investor though is network, network, network, network – always be ready to tell whoever you are talking to why your business is so exciting – you may not be talking to an angel investor every time at every event or occasion, but I guarantee, the person you are talking too probably knows a few angel investors, whether they know it or not…

Good luck and send me a note or add a comment…

Best

Andrew

When looking for Angel investors, do I put my proposed terms in my business plan / investment proposal? (startups.com)
Angels vs. Venture Capitalists (pmarca.com)

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Tagged with: angel investor • Business • Financial services • Google • Investment • Net worth • San Francisco • venture capital

Are you this kind of person?

On March 1, 2010, In How To, Offering Help, Raising Money, By Andrew

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You can get almost everything you need for free on the web…

So much so that I spent months looking through different sites, subscribing to different email lists and following certain bloggers. I thought I could get everything I needed from multiple sources and save myself some cash. After all, you can get nearly everything you need for free online right?

But then I realized something. Yes, I probably could…if I was looking for a recipe for chocolate brownies or the ten steps to teach my dog to sit and roll over, then you can probably find everything you need for free online. But I realized, after spending months pulling different strands of information together, that I was going to have to take a risk and trust that the person who was offering me a product that I’d have to pay for, was not a shark and the product would be worth more than I paid for it…

I had to, in short, suspend my disbelief that this person was going to screw me…tough when it was more than $100 and how much about this guy did I really know? I guess the reason I took the step and bought the product was because what I wanted to know was not as unimportant as a chocolate brownie recipe – I wanted the information and a) didn’t want to wait and spend the hours or days pulling the information together and b) I wanted to make sure the information was good information…I made the decision to trust that person and thankfully, I wasn’t disappointed…

So – I recently launched (in a very quiet manner…) two products / services….the first was offering ten entrepreneurs one on one time to help them prepare for angel or venture capital funding….I called that program “1 of 10″ and details are here.

Most of the ten slots sold out quite quickly – so some people suspended their disbelief and were committed enough to their new businesses, that piecing together information from multiple sources and ‘winging it’ wasn’t good enough. I guess that when something is as important as fulfilling your lifetime dream of starting a business, investing in improving your chances of success is a smart thing to do…

The other quiet launch was of an audio product which was designed to help people supercharge their fund raising from angel investors in particular. Details of that product are here.

This audio product is a pre-launch of a more comprehensive (but probably more expensive) product with video, pdfs and audio.

So after writing multiple posts to help people I finally dipped my toe in the water and create some products. The goal of those products is to bring together years of experience and help people who want to increase their chances of raising money to fund their new or young businesses. Some readers have asked why? And even thought (or implied…) that it was somehow wrong of me to do so…the short answer is, there are plenty of free resources online but I’m a firm believer that you get what you pay for…if something is worthwhile, then there is usually a cost involved – like any business, the customer needs to decide if the item they wish to buy is worth the price tag attached. I can honestly say that making a few hundred bucks for a product is not a real motivator – but, and here’s why there’s a price tag at all, knowing people appreciate the content enough to purchase them and based on that purchase will likely take the content and use it to start or supercharge their business IS a huge motivator.

Could I give it all away for free? Sure. Would people value the content as much…you know, somehow I doubt it and anyway, what is the price tag for saving yourself months and increasing your chances of getting the money you need to fulfill your dream?

Last question of the post – what help do you need? or What question do you have? If you could get help with anything related to your startup – what would that be? Anything goes related to bootstrapping, angel investors, Venture capitalist or even broader.

Add a comment or send me an email via the contact page.

Best

Andrew

Ten Top Funding Sources for Startups (startupprofessionals.com)
Some fundraising tips (theequitykicker.com)
The Basics of Film Financing (dividendsandpreferences.blogspot.com)
Seed funding best practices (startupcfo.ca)

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Tagged with: angel investor • Business • Financial services • Fundraising • Investment • Money • Small business • venture capital

Supercharge your Angel Investor Fund Raising

On February 23, 2010, In Angel Fund Raising, Audio Course, How To, Podcast, By Andrew

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As many of your know, I’ve been working on a set of tools designed to help you if you are going through the fund raising process for a new or existing company…a friend suggested I should try to bring together some of the unique experiences I’ve had and help other entrepreneurs who are looking to get investors for a new or an existing business.

I wish I could thank this pal for urging me to start this but right now, I want to chase him down and beat him to within an inch of his life with a large inflatable mallet, because this really isn’t easy. What would be easy would be to take an existing book or series of blog posts from others and pull something half assed together – but what would be the point….?

No – I want to create tools which are all the things I wish I had when I spent a year or so spinning my wheels trying to raise money the first time around. What could have saved me months and allowed me to get my first company to market that much sooner?

Those are the tools I want to get out to folks….those months could have meant increasing the chances of survival and success….now, the business did well, but they don’t always…months matter!

You can always try to raise money for your business with advice from friends and the like, but in my view, we all need all the help we can get when its something as critical as realizing our dreams for starting a business…So, I’m doing my best to bring together learnings from a number of years and experiences but *whew* it really isn’t easy because I throw away probably half of what I create because I want them to be that good for you – if you are raising money for your business, because lets face it, you don’t have the time to mess around on crap.

If you watched the short video on ‘Who is the Funding Guru?’ – you’ll know that I was asked to sit on the Small Business Council by the UK Government and with a small group of entrepreneurs I worked on funding and other issues relating to entrepreneurs and start-ups…that brought me together with some amazing folks on both sides of the table – entrepreneurs and investors. I think I can help if you are looking to raise funds for your business…

So – before I rant some more…the course should be ready in March (huge amounts of fingers being crossed…so much so that its making it tough to type…OK, I’ll uncross them until I’ve finished typing).Until then, I wanted to take the audio portion from one module which focuses on “How to Supercharge your Angel Fund Raising”.

This audio module will ultimately have video, pdf support and other elements but in the meantime – thought I would get the audio out there and start helping you if you want to find and get those angel investors so you can start building that amazing business you have been dreaming about…the great thing is, once you understand how powerful this technique can be – then you can use it for speeding up you fund raising now and for every funding process you and your friends go through… Get the audio course here

Andrew

Angel Investing- Back in Business (businessangelblog.com)
Beware the band of Angels (the-accelerator.blogspot.com)
Is it better to find a local angel investor? (startups.com)
Be Part of the Entrepreneurial Revolution (startupprofessionals.com)
Seven Investors To Avoid (dccrowley.posterous.com)
How to Ask Family and Friends for Cash for Your Business (imbrandon.com)

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Tagged with: angel investor • Business • Business and Economy • Fundraising • Money • Small business • Startup • venture capital

What Are Angel Investors Looking For? Six Key Motivations of Angel Investors (#4)

On February 17, 2010, In Angel Fund Raising, How To, Raising Money, By Andrew

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The first article is here and the second here and the third here, just in case you missed them…

If you have not had a chance to read them, let me give you a brief cliffs notes – this series of articles responds to the question I get asked often about Angel Investors…

Question 1: “What are Angle Investors looking for?”

When someone asks that question, it shows the person asking has an appreciation that the fund raising process is not 2 dimensional or binary…in other words, they recognize the answer to…

“What are angel investors looking for?”….

….is broader than just “To Make Money!”

By looking for a better answers than ‘just to make money’, they are moving themselves closer understanding the real levers they need to use when meeting and building a relationship with angel investors which are key to successfully raising Angel Investor money – and that, along with helping people with the Venture Capital fund raising too…is what this site is ALL about.

So, without further ado…I like to outline what I believe is the fourth installment of ”What Are Angel Investors Looking For? The Six Key Motivations of Angel Investors”.

With the first startup I grew, I had a handful of Angel Investors…looking back they each were completely different. I had one angel who worked for one of the big finance houses on Wall Street, another who was a seasoned Academic and liked to invest in a number of small businesses and help out where he could…and there was another angel who was also an academic but he had an absolute passion for getting real insights into the startup process. As a Professor at Harvard Business School, he had his pick of young companies that would open their Kimono for him and many did…he sat and met with most of the CEOs of some of the fastest growing companies in Silicon Valley and beyond.

Now this last Angel Investor never seemed motivated by the opportunity to make a significant return on his investment – in fact, when this business paid off for its shareholders, he was the most laid back of all of them. With a certain amount of hindsight, I have come to the conclusion that this angel was motivated by two ‘motives’ in particular – those being ‘Contribution’ (or motive #3 from the previous article…) and…

Motive #4 Variety / Interest.

In his case, the one key driver was his interest in the startup process itself – the challenges, the highs and the lows – also, by being involved in the team, got involved in delivering certain milestones which took him outside of his academic life – being part of the startup gave him additional ‘variety’ - but please don’t mistake his passion to be part of the startup ride for the previous motive I mentioned (3#) i.e. the ‘vicarious thrill’ motive…this angel wasn’t looking for a thrill but rather for the learning and the interest of seeing the business unfold and being a part of the team…

So, Angel Investor Motive #4 – Variety / Interest.

Now before we wrap up this post – a quick point…

This angel was motivated by both the desire to ‘Contribute’ i.e. Motive #2 and the ‘Variety’ i.e. Motive #4 - the fact that he was motivated by more than motive is important…most angels are driven by a number of drivers, not just one.

And that point is important…

As you go out looking to raise angel funds for your business, you have a few key objectives…

Find angels
Understand what they are looking to achieve from an investment
Understand what value they can bring above and beyond the money
Make sure they’re on the same wavelength as you
Negotiate and close the deal

If you remember nothing else from this posting – remember this…

If you skip step 2, step 3 and step 4 and just go straight for step 5 – the close…

…chances are you could be causing significant harm to your business which will impact your ability to build a successful business in the future. You may REALLY need that money but don’t let your need for money blind you to what’s right for you and your business…in some ways its better not to have it from the wrong angel for you…

If you’d like some help with the angel fund raising process… take a look here or here’s a way to supercharge the process…

Are you going through this angel fund raising now? How is it going? Going to go raise funds soon? What makes you nervous about it? Post a comment – I’d love to know…

Here’s to your startup success.

Andrew
http://www.TheFundingGuru.com

Our secret to getting funded (entrepreneur.venturebeat.com)
What is the Future of Funding? (venturebeat.com)
Flocks of Angels, and All You Need is One (startupprofessionals.com)
The Smell Test (startupcfo.ca)

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Tagged with: angel investor • Business • Financial services • Harvard Business School • Investment • Silicon Valley • venture capital • Wall Street

Are Angel Investors Cheap Money?

On February 16, 2010, In How To, Raising Money, By Andrew

Are angel investors cheap money?

Have you been thinking about getting a few angels?

No…Not the kind with wings but the kind that dips into their big pockets and help entrepreneurs start and build their businesses.

The first two companies I started began with Angel Investments – for the first start-up, where I had designed an award winning fire escape ladder, the angel’s cash allowed me to quit being a minimum waged Consultant (minimum wage when you divided my hefty salary by the 100 + hour working weeks…) and gave me the chance to pursue my passion to start and build my first business.

If you google ‘Angel Investors‘ , most of the results focus on what Angels are (broadly) and many of the articles keep it so general as to be close to useless if you are actually in the process or are about to start the search to find and close your first angel investor round…many articles include some good points but I found most of them too ‘money-centric’.

Huh? You are probably thinking…isn’t that what Angels are all about?

Well I’d like to offer you a different way of thinking about it.

It’s true that Angels tend to get involved in very early stage companies and often look for a high rate of return on their cash…let me explore that for a second…

“Angels tend to get involved in very early stage companies…” – in my case, the first $XXXK of funds were raised while I was still an employee elsewhere – at that time I had…a business plan and a prototype. THAT WAS IT~!

No customers, no employees, and no office – literally just a stack of pages I’d sweated blood and tears over and a prototype of a product that would go on to look very different.

What these angels were really investing in was ME! And I would guess that most Angels who go ahead and invest in a business ultimately make the decision not because of the business plan, the prototype or even the first few customer endorsements but because of the person with their hand out…

So – back to the money. Angel investors get involved at the RISKIEST stage of a start-up – most start-ups don’t go anywhere and their money goes POP! Gone! Now even if Angels are people with a high net worth – they still (probably) worked hard to make it…so as, in the investor community, the angels tend to take the most risk – they also look for the highest multiplier on their money.

Multiplier? Whassat? So – for example, they give $10K – if they get $100K back when there is some form of liquidity event then they have made 10X on their initial investment of $10K (i.e. $100K divided by their initial $10k).

As a for instance – I have heard of angels looking for 20 times or even 30 times of their money back. So, for that $10K, they would hope to get $200-$300K back from some form of liquidity event.

Liquidity event? Whassat? …that’s basically even that allows the investors to get some or all of their cash out. (Example – IPO, acquisition etc)

Bringing this full circle – So why Andrew – do you think that the Google results were too ‘money-centric’? Isn’t that what angels are all about?

Yes and No! In my view, the money you get from Angels tends to fall into one of three categories.

Either CHEAP MONEY, EXPENSIVE MONEY or just, plain old, MONEY!

Am I talking about the multiplier again? Absolutely not! The amount of multiplier you, as the entrepreneur, can guarantee to the angel investors is zero! You can guarantee absolutely nothing. You business might go gangbusters and someone could come along and buy you for a fortune. Likewise, your business could go gangbusters and you could IPO or it could cease to get off the ground and their investment could be worth 5 cents – the multiplier the angels get could be very different with each scenario…you have no way of predicting what it will ultimately be…

So let me explain what I mean by cheap and expensive Angel money…it’s quite simple…

When I took angel money for my first start-up, it became obvious, very early on, that I had three types of investors:

1) The Value Add Investor:

This is the investors that calls you up occasionally and is looking to help…they are opening up their contacts database and connecting you with other angels, advisors, entrepreneurs, suppliers or whomever…to help you and your business grow. Better yet, you talk on a weekly basis and they help you think through the challenges and the strategic questions you have for your business, they help open doors for you and even drive great recruits to your business and help close them so you increase your employee firepower!

Money from this kind of Angel – I call “Cheap Money’ – because you get much more value than just the cash – it makes their money really worthwhile so whatever multiplier you ultimately pay, it was partially because these value add angels helped you every step of the way – their payout is cheap money. You get me?

That leads us to the other kind of Angel…

2) The ‘Pain in the Ass’ Investor:

There are some investors who, as soon as they give you the check, become an absolute pain in the rear. From that moment forward, they believe they own you…no, not just a piece of your business (which they have)…but YOU! They will call you 24/7…they will ask you to jump through hoops that may have very little to do with the businesses immediate needs and, they will tell you, loudly and often how bad a job you are doing and how you should be doing it some other way.

Their way ideally.

And do they open their contact database to help out? Rarely if ever. Their function is to become a complete time sink and a constant annoyance.

I consider money from this kind of Angel…”Expensive Money”. Wouldn’t you?

3) The Simple No Thrills Angel Investor:

The third type of angel is just plain, old money – they give you the cash, you put it into the business and they are happy to get the monthly or weekly updates about how the business is going – their value is limited to the initial cash they may put in.

Now – before I finish this post – I want to leave you with the challenge the above creates…

Here’s the challenge – “You can’t tell which angels are going to be in category 1 or 2 or 3 until AFTER you have taken their cash and they’ve signed on the dotted line.”

Its true – you can interview and screen angels (if you have choices…and you ALWAYS have choices…even if it’s to bootstrap and use your credit card while working at a day job) and it’s tough to tell if they will add value or be the bane of your existence.

I hope the above has given you a few things to think about. And come back so I can take you through how I managed to have a higher chance of picking the value added Angels and getting ‘Cheap Money’.

Have you gone out and locked in Angel Investors? Any good stories about the experience or horror stories you’ve ‘heard’ from others?

Join my mailing list to the right if you want to get additional updates. My goal is to help with the challenges of fund raising for entrepreneurs, their startups and growing businesses.

Here’s to your startup success…

Andrew

Don’t Take Angel Investments From VCs (billburnham.blogs.com)
The Smell Test (startupcfo.ca)
Angel Investment (startups.com)
How to Find an Angel With Wings (startupprofessionals.com)
Downsides of getting funding from an Angel / VC (startups.com)

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Tagged with: angel investor • Business • Financial services • Google • Initial public offering • Investment • Rate of return • venture capital

What Are Angel Investors Looking For? The Six Key Motivations of Angel Investors (#3)

On February 5, 2010, In How To, Raising Money, The Funding Guru, By Andrew

Key Angel Investor Motivations #3

Welcome to the third installment of “The Six Key Motivations of Angel Investors #3″

The first article is here and the second here – just in case you missed them…

So what are these articles all about?

One of the top ten most all time popular questions relating to Angel investors (aside from “Where the heck can I find them…”) is “What are angel investors looking for?” or “What are the main motivations of angel investors?”

Its just too easy and frankly a real missed opportunity just to say or think “to make lots of dough…”

If we consider that Angel Investors are accredited investors then making more dough is unlikely to be at the top of their motivation list and having had my own share of angel investors for my businesses, the profit motive was high up there but certainly not the only motivation and rarely at the top of that list.

I put forward that aside from financial return, contribution was also a key motivator for many angel investors. I personally subscribe to the thinking that once you are ’secure’ a different set of needs kick in. So, aside from Contribution what do I believe is the 3rd Motive for Angel Investors?

Consider the accredited investor – what are they?

An accredited investor according to Rule 501 of Regulation D of the Securities Act of 1933 is a few things but the important sentences for most entrepreneurs are:

a natural person who has individual net worth, or joint net worth with the person’s spouse, that exceeds $1 million at the time of the purchase;
a natural person with income exceeding $200,000 in each of the two most recent years or joint income with a spouse exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year;

Stepping outside of the legal verbiage – accredited investors are High Net Worth individuals, according to the World Wealth report written by Cap Gemini & Merrill Lynch, there are over 10 million people considered High Net Worth and there’s also a group out there in the Ultra High Net Worth Category who’s assets are worth over $30M (the UHNW definition).

Now I’ve seen all types of data which suggest how many accredited investors there are, how they are spread across the globe, the growth rates of their numbers and so on – but I have seen no studies that say how they made their money.

Given I’m just guessing here – I’m going to think about those people I know who fall within their ranks and think through how they became accredited investors – and they fall into a few categories as follows:

1) They made the money from starting companies

2) They are doctors, lawyers, surgeons or some other lucrative profession or

3) They inherited the money

So why is this all relevant?

Well, it leads me into what I believe is the third motivation of angel investors and it resonates strongly with some of the angels that have invested in my businesses.

Key Angel Investor Motivation #3 is the “Vicarious thrill”.

For those people who made their money starting their own businesses – the days when they can feel that first time thrill of seeing their startup baby taking their first steps have passed. If they’ve started and built companies – that deflowering of their startup virginity has already occurred – they cannot personnaly experience that unique thrill again. But they can invest in others and tap into that breath sucking in exhilaration of watching another entrepreneur crest that challenging hill…

For those that made their high net worth as Doctors or Dentist – investing in a young entrepreneur and startup allows them to get a real insight into a different set of experiences, to play a part in something outside of their current daily lives – why did angels start by investing in Broadway shows – the majority of which flopped? So they could do something exciting, so they could get their “vicarious thrill’.

I have a strong mental picture of one of my angel investors who had built one of the most popular pizza chains in Europe only to sell out for more cash than he can ever spend…in my view he invested in my first company because he wanted to make a contribution and he really enjoyed being a part of starting and growing a business – he went on to create more businesses of his own, to buy small failing businesses to turn them around, but he is was also a big supporter of entrepreneurs. In my opinion, he enjoyed the experience of the startup either directly or once removed.

Financial return was NOT the main motivator.

Consider motive number 3 when hunting for your angel, when locking them in and working with them ongoing. Critical to engage them are the ups and the downs of your business – the challenges just as much as the successes – at the end of the day, and this is hyper important stuff…

…one of the BEST things about starting a business and stepping outside of corporate life is the ability to be true to yourself and your business. Don’t make the mistake of letting your need for the money mean that you choose the wrong angel investors. You are not looking to exchange that angel investor cash for a new boss…if you want a boss, stay where you are and don’t start a business.

If you’ve already raised cash from angel investors I’d really appreciate hearing about your experiences – other readers would find it helpful too…if you are about to raise cash, where are you going to look? How are you going to find your angels?

If you’ve found this useful or thought provoking sign up to get email updates on the right side of the page.

Here’s to your startup success!

Best

Andrew

Ps: For those who are committed to raising funds for their business – this might help…

http://www.TheFundingGuru.com/1of10.html

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Tagged with: angel • angel investor • How To • raise funds

How do I write an Executive Summary?

On January 22, 2010, In Angel Garage, How To, Raising Money, By Andrew

How to write an executive summary

This has got to be in the top ten questions I get asked by those entrepreneurs who are kicking off their first serious and committed attempt to raise money. I know when I first went through this process, I went out and asked different people…

“What do I need to do to raise money for this business? I haven’t got much in the way of a track record yet but I’ve managed to get a prototype and some commitments from would-be customers…”

A few people shrugged without much of a clue, but one or two had done it before and began to point me in the right direction…

“As this is very early stage you should approach either family and friends or angels…”

Well, my family and friends are the best but at the time, neither group had much disposable income and also, if I’m honest, I felt a little weird about asking them – part of me wanting to make it on my own. Well, on my own with a real investor rather than a family member who has taken pity on their crazy nephew, brother or cousin….

So – Angels it would be then…

“So, what are angels looking for?” I asked.

“They’re investors – so they’re looking for a significant return on their money…and most of them are looking to invest in companies where they understand the space…where they can help the entrepreneurs and open doors.”

Sounded good to me…

“And what do I need to show them so they’ll consider investing?”

The person thought for a few seconds, smiled and said, “…more progress on your business and an executive summary would be good places to start…”

After reading various sources, writing different executive summaries and bouncing them off a few people – I used a format similar to the one below to raise my first $250K ever…and as that was about 15 years ago, it was a decent little angel round. Since then I’ve raised a good seven figures from angels and venture capitalists and helped others to do the same but you have to start somewhere right?

One consideration is there is NOT a locked in, inflexible template that you have to use – the idea is to allow the angel investor to get to the meat (i.e. why they should invest in your business) as quickly, simply and impactfully as possible…it’s really that simple.

Executive Summary:

Introduction:
2 0r 3 sentences that impactfully outlines what your business does and how it addresses a key demand or need. This is the place to succinctly hook the reader by addressing how big this business or idea can be with as little hyperbole as possible.

NOTE: I’ve seen entrepreneurs getting really carried away here on how unique their business is or how it leverages some really innovative technology – businesses started by technologists tend to fall into this trap way too often. An angel investor isn’t usually focused on the ‘how’ but rather on the ‘why’. Leave the ‘how’ to either the business plan or an appendix (if you must include it at all). But on this point (and all the points), consider your audience – if you are meeting with an angel with a heavy tech background (Example: The Chief Technology Officer at Microsoft) then maybe briefly address the ‘how’ but the problem to be solved is usually the emphasis of this section – its where the imagination takes off … “With our product or service customers will never experience this problem again…”

Example: Product X will address the need for internet connection on airplanes by offering internet without interfering with airplane communications through a stratospheric band of wireless internet.

Now – I made up this product on the cuff but the hook here is definitely in the ‘why’ – it’s not – ‘Product X leverages 301.1b technology developed to be used on the following bandwidth and doesn’t interfere with airline radio types X,Y, Z…yadaa yadda yadda’. You get me?

So - Introduction - 2-3 sentences on the big idea, the value proposition, and how huge it’s going to be and how it will revolutionize the market as we know it. This is a great place for the passion you have for your business to come out – starting businesses is tough – without passion you will probably fail. So, angels keep a strong lookout for people that have passion, commitment and skin in the game.

Background:
This area is to flesh out the key points in the introduction with supporting data / research if you have it. So, taking the above example – I’d go into how many airlines fly each day, how many business users would need the service, ongoing trends to give a perspective on opportunity and market.

NOTE:
Don’t get caught up in too much data thinking it makes you the expert – you are NOT trying to be the expert but to show the investor a) there is a big money making opportunity b) that you ‘get’ the space and c) you’ve done your homework. Try not to bore the angel – they’re busy people and no one is going to be as passionate about this idea as you – keep it succinct but impactful.

Market:
How big is your market? This is a natural follow on from the background above. If you create a business how can you protect and grow your slice of the market? Who are the competitors?

NOTE:
On competitors – one tendency and this is a trap I fell into with my first angel presentation 15 years ago was to say “There are no competitors – this is SO new that we don’t think we’ll have any competition – the market is wide open”

BEWARE! BEWARE! BEWARE!

There are always competitors, even if peripherally, even if it’s just for your customers share of wallet and Competitors show there’s a market in the space you are going after. Competitors are a GOOD thing (as long as they’re not dominating 80% of it – if so, really consider if starting a business in this space is a smart move…)

Financial or Business Model:
How are you going to make cash? The days of putting something out there and seeing what happens have gone along with Madonna being at the top of the cd charts (Cd’s – what are they?). If its a product – what and who will you charge? If it’s a service – what and who will you charge and how often do you expect to do so.

In the Business Plan you’ll need to flesh this out with a balance sheet ad cashflow forecast for the next 3 to 5 years – not so for the executive summary (*Whew* isn’t that a relief?!?!)

Team:
Who’s going to create and build this fantastic business and why the angel should have confidence they can get the job done. A paragraph on the key team members is fine.

NOTE:
If you have gaps in your team – spell them out – let the angel know you realize where you have gaps and you have a plan to address them as a first priority.

NOTE PLUS:
Don’t ever try to gloss over what you don’t have or don’t know – a relationship with any angel is based on trust – you get caught lying or exaggerating once and that’s it…game over!

Capital Requirements:
This section should focus on what you need and why you need it. Plush offices are not a good reason. Spell out how this cash will help the business achieve specific milestones – and be careful, you and the business will get assessed against your ability to meet those milestones – especially when you come back to raise money for the next round.

Assuming you have written a kick ass executive summary and have a business which is attractive – the next stage you’ll need to get up to speed on should be How do I negotiate an angel investor deal and what will the angel investor want from the deal.

Let me know if you’d like me to cover that subject next in your comments or emails. They are always welcome and thanks for the notes you all sent to my last post.

Stay tuned for a set of tools I’m creating to help you all in this process.

Andrew

PS: Any more questions? Reach out via the contact page above and join my mailing list by adding your name and email in the box to the right. I’ll also send you some valuable downloads to help…

PPS. want to supercharge your angel fund raising? (Supercharger) – just released and available in this format for a short time only

Criterion for getting money from an Angel Investor / VC (startups.com)
Downsides of getting funding from an Angel / VC (startups.com)
Kevin Rose’s 10 Tips for Entrepreneurs (readwriteweb.com)

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Tagged with: angel investor • angel investors • Business • Business plan • executive summary • Financial services • How To • Madonna • Microsoft • Small business • venture capital

Business Investor in South American or Brazilian Company

On August 2, 2009, In Raising Money, By Andrew

South America

An alumni contacted me looking to invest up to $10M in a private or public company in either Brazil or South America in the following sectors:

Oil and Gaz
Renewable and Alternative energy
Solar energy
IT/Telecommunications/Media
Aerospace & defense
Consumer Goods
Healthcare technology
Textiles
Commercial Real Estate
Manufacturing

The company needs to have at least 2 years positive cashflow.

If your company meets that criteria, contact me and I’ll send through your details.

Andrew

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Tagged with: angel investor

Roulette or a Sure Thing?

On August 1, 2009, In How To, Raising Money, By Andrew

: A game of chance

Maybe you’ve been to a Casino and seen a roulette wheel or perhaps you haven’t – either way, everyone is probably familiar with the game. There is a wheel with pockets and inside the pockets. Within those pockets of red and black are the numbers – from 1 to 36 and a zero (or double zero) on a green background.

The wheel is spun in one direction and a white ball is sent in the opposite direction. After the whirr of the rotation comes a click, a bounce and a few more clicks and bounces as the ball hits the sides of the pockets, initially rotating too fast for the ball to settle. As both slow, the small white ball and the wheel both eventually stop the ball sitting inside one of the numbered pockets. That is roulette – a game millions of people have played for the excitement and the chance of winning their fortune– just like a Start-Up!

And just like pretty much every game of chance, people have spent hundreds of years trying to get an edge – a way to shave points off the odds in their favor, with the hope and belief that having a slightly better chance than the House and the next person – they’ll win their fortune.

If you’re reading this blog post – you may not be a gambler, you may not have any interest in gambling – I’m hoping you are here because you are interested in starting or building a business and you are interested in raising money from investors for it. Well folks – you are one of the biggest gamblers there is on the planet – whether you lay your chips on a table in a Casino or not. Make no mistake – starting a business and going into the entrepreneurial ‘Casino’ is risky – and you’re not laying down plastic chips – you are laying down seconds, minutes and hours of your life in the pursuit of something that may be great! And do you know what else?

You should look to optimize the percentages in your favor…

There may not be a House that will take your chips if you lose – but that time you spend on building a new business does not get put back in your life wallet – you spend them, they’re gone.

So how can you weigh those precious percentages and do your best to tip the chances of success more in your favor?

Well, I can think of a few ways but there a many…

1) Try to find someone who has trod the same path you are about to tread – and save yourself some time by trying to understand the opportunities and pitfalls that they experienced. Learning just a few of both will make the time you invest in finding and learning from a good mentor is incredibly worthwhile. It will pay off in dividends of time and money saved.

2) If you are going out to get Venture Capital funding – Andreas, the MD from DFJ I just interviewed, made a point which continues to resonate with me. Self filter when reaching out to a VC – taking even a cursory amount of time to understand which VC partners are likely to be interested in your business model will increase your chances of success.

3) When introducing yourself to a VC through either a contact or directly – avoid the templates, the Dear Sir / Madam’s, the cut and pastes - unlike Roulette, finding an investor is not a numbers game – sending a standard form letter to a hundred Venture Capital partners is likely to get you a hundred rejections. How often do you buy when you get an envelope through your front door addressed to ‘The Resident’? Yeah me too!

Now, I’ve been working on a number of tools which I’m confident will tip the playing field in your favor but I going to hold off from launching them quite yet. I want input from more folks so I’m 110% sure they’re ready and 120% confident they’ll help entrepreneurs optimize their chance of winning the Investor Jackpot-

But like I said above, raising money from Angel Investors or Venture Capitalists is not a numbers game – but you can certainly increase your likelihood of success – and when you are trying to raise One hundred thousand, or one million or one hundred million dollars – don’t you think you should try to improve the odds in your favor?

If you would like to improve your chances…consider signing up to my mailing list.

As always, I would really appreciate any thoughts or comments.

Andrew

PS – for a short time I have an audio course which could seriously help your fund raising. I’ll soon bundle it with a broader course so it could be pulled from availability at any time.