When it’s time to approach business angels there’s a few things to consider and a few other things to keep in mind, and a few even other things that for the most part are common sense yet entrepreneurs tend to forget about all the time.
But before you’re ready to look for someone that will assist you not only in the next round of financing for your company, but also extend a hand in helping to get the company off the ground, you should consider a few things.
For those who read this regularly, we may be repeating ourselves, but bear with us until we get to the meaty stuff.
Am I a functioning company, and do I have a product or service that I can offer for sale, or am I already selling? If the answer is yes, you can consider starting to contact business angels. If you are prior to this stage in your business development, then we highly recommend you save yourself and the business angels the time and not send anything out.
Now, since you’re ready to seek funding, you’re selling a product, and need a financial boost, here’s some very good, yet very simple best practices on….
Raising Angel Capital….
One: This may seem obvious, but apparently it’s not. Do not send your proposals to angels / angel networks that are not in your industry. If you’re a high tech company, a business angel network that deals with energy is not a good idea to send your summary to. Please stick to soliciting people to the industry that you’re in.
Two: Don’t bother sending proposals to “managed” angel funds. These fund managers are often that, just managers, they invest in companies but offer no outside help, and neither do the business angels. These types of funds tend to result in the following. 1. Companies going bust 2. Funds going bust due to poor investment decisions. 3. Angry investors.
Three: Two goes into three nicely, you want an Angel that can lend a helping hand, an industry expert on who you can count on and someone who will want to actively help in getting the company to the next level. That someone should mesh well with the current management, and aside from playing financier, should also want to mentor. This is VERY important.
Four: When sending out your proposal, executive summary, business plan – wait … actually don’t do the third one, never ever do the third one. “But why F3FundIt?” Because no one who is busy wants to read through 25-40 pages of your analysis, and I mean no one.
Send out proposals/exec summaries that are 2 pages maximum. Any more and it will probably wind up in the bin. It’s not that your sweat isn’t worth anything, your b-plan is in fact a guideline for you and your company, not for your investors. They’ll know if they like your concept in the first 3 minutes, and if something catches their eye, they’ll get in touch with you. At the same time, when you contact them, they can’t honestly say “No I haven’t had a chance to read your two page summary”, can they now?
Five: Something that we constantly hear form Angels are complaints about how poorly the company presents itself, how, after 15 minutes of speaking on the phone with an entrepreneur the Business Angels are lost as to what the hell the entrepreneur is doing. Know business terms, get accustomed to knowing your value proposition and pitching your company – practice in front of the mirror if public speaking isn’t your thing. Be clear, and be concise. Your startup will thank you for it, after all your selling it, and yourself.
Live by it, learn it, and do it. Chances are if you follow these tips and you have a good idea – you’ll wind up getting meetings, or at least phone calls.
And if any BA’s are out there, any other pet peeves you’d like to tell us about?
I didn’t really get the second tip. What do you mean by “managed”?
A managed Angel fund is a collective investment fund that works similarly to a VC fund in that money is pooled and conceptually allows BA’s to hedge their risk.
In this scheme, investment decisions are made by a designated manager of said fund in what that person believes to be high yield companies.
Hope that helps.