How to secure business angel investment
Business angels can be a great source of finance for start-ups or established businesses looking to grow. Angels take a high personal risk in any investment they make, so when preparing a pitch, be prepared for a tough grilling.
In many cases, the enthusiastic entrepreneur turns up to give the presentation of their life, they make a good start by saying who they are but five minutes in (half way through) they have not even explained the concept. Angels are checking their emails or looking at their watches. The pressure is starting to build on the presenter. One minute to go and there are still six slides – they rattle through the management team and the financials and wait with baited breath for the Q&As.
It is the Q&As that make or break a deal. An angel is allowed to be critical, it is their money of course. The depth of questioning is sometimes staggering for such a short presentation.
“So you have the patent for a device under the material, but can someone come along with a device within the material?”
“So you have built the algorithm but why can’t I go and do the same thing tomorrow? What is stopping Google building this in a week?”
“Why do you want money for sales and marketing if you are using a distribution channel – are they not are doing the selling?”
Then the killer question…
“So you have already sold a couple of businesses in the past and are asking me for money. How much have you invested?”
“Well ….. we have invested £100,000 of cash and time”
“Sorry, I will ask again and a bit clearer, how much cash have you invested?”
“Well ….. that is an interesting question, £95,000 of time and £5,000 of cash.”
Forget the preparation for the event, the time spent on a clever and striking PowerPoint presentation and maybe the cost of a new suit, an Angel can unravel it all in 30 seconds!
There is a great opportunity for businesses to raise finance through Business Angels, especially by bringing in an equity stakeholder who will then have a vested interest in the business doing well and a lot of Angels bring their experience and contacts to the table, which can be priceless.
For all those companies thinking of presenting, I have a few tips…
1. It is a business plan pitch, not a marketing pitch – no waffle
2. Make sure the audience understands the concept. If possible, demonstrate it
3. You may be in a £100bn marketplace but be factual about your expected share, and more importantly how it will be achieved
4. If you are in a mature market, competition disruption should be a key segment of the pitch
5. The quality of the management team is key so spend time on the credentials and involve them in the Q&A session
6. Finally, always be prepared to have an answer to “If I put £100k in, what risk are you taking?”
If you cover these points, and you have a good concept, you have a chance. If you do not cover these, I would suggest that you save the train fares.