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?
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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) [click to continue…]
