To start what are Angel Investors?
An angel investor or angel (also known as a business angel or informal investor) is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity. A small but increasing number of angel investors organize themselves into angel groups or angel networks to share research and pool their investment capital.
Some resources to find Angel Investors:
How to pitch to an angel
In today’s turbulent economic climate, securing business funding can be a minefield for entrepreneurs. With credit from banks drying up, many small business owners are turning to alternative forms of funding such as angel investment. However, this can put added pressure on those who are not used to ‘promoting’ their business in front of potential investors. Here is a list of top 10 tips to help entrepreneurs deliver a successful business pitch:
- Elevator pitch – Business owners should be able to pitch their products or services in any circumstances, even when they have a very limited amount of time. An elevator pitch is a quick, yet comprehensive, overview of a business short enough to be delivered in the time span of an elevator ride.
- Prepare – As Mark Twain said “It takes more than three weeks to prepare a good impromptu speech.” Pitching to a potential business angel could dramatically change the future of a business. Preparation is key to take advantage of this opportunity.
- Setting up the stage – If possible, it’s always ideal to prepare the room of the meeting well in advance. This is especially important if the pitch includes a product demonstration or the use of multimedia aids.
- Look your best – A common concern for small business owners is choosing the right clothing for a pitch. Wearing a suit is usually preferred as it shows a level of respect for a potential investor. A general rule of thumb is that in these circumstances you can never overdress!
- Know your numbers – When looking for investment, small business owners should know their accounts inside-out and be able to discuss them with investors in detail. Commit key figures to memory and prepare a one-side ‘crib sheet’ to avoid forgetting crucial information due to nerves.
- Have a clear strategy in place – A solid business plan that identifies the strategy is crucial. The plan must contain a commercial idea which will provide an eventual profit for investors or, as a minimum, sufficient profit to repay the interest and the principal on a loan.
- Product vs. People – Investors are interested in not only the product, but also the marketplace, the competition, the management team, the eventual exit strategy and of course the entrepreneurs themselves. Business angels are investing in people as much as companies, as they plan to work together over the long term. Establishing a rapport with the potential investor is key to a successful partnership.
- Care – Business angels invest their own money and they would expect to see business owner putting themselves on the line for their project. If an entrepreneur doesn’t show commitment to what he/she is doing, why should investors?
- Be honest, even about tricky subjects – A question that angel investors frequently ask is “what are the risks in this business?” Small business owners must be prepared to discuss contingency plans and potential difficulties the business could face. Angel investors will appreciate a realistic assessment and honest responses as opposed to a rose-tinted view.
- Feedback – Regardless to the outcome of the pitch and if funding gets secured, receiving feedback from potential investors it’s invaluable. Entrepreneurs should be prepared to receive negative feedback and take it on board to refine their business ideas.
Finally, remember, no small business owner is alone. The support of experienced investment agencies and other professional advisors should not be understated. In addition, if small business owners prepare thoroughly and follow these best practice tips they will be well-placed to successfully attract potential investors despite the downturn.
By Michael Weaver is chief executive of business investment agency Beer & Partners.