Angel investing is attracting the attention of startup entrepreneurs. The perks offered by angel investing include securer funding options and flexible return options. Entrepreneurs need to understand the techniques of approaching angel investors if they want to get their targeted investments.
There are different qualities that angel investors want to see in entrepreneurs. They want the entrepreneurs to be straight shooters who mention calculated risks instead of boasting about business success one week and declaring bankruptcy the next. They also want real numbers of profits instead of predictions. They want transparent and honest entrepreneurs who don’t rely on faith only but protect their enterprises with calculated business.
But before every other thing, you need to begin with an appealing business profile to attract the angel investors. An appealing profile is the strongest play card to bargain with angel investors. Here are 4 qualities that make a small business profile appealing for angel investors.
Professional but not Personal Relation
Old school investment models included investing in the business of your personal relations only. Today, with the expansion in market of small businesses, the investors are also learning the drawbacks of investing with personal relations. For example, a failed investment with a family relation will ruin the business and relationship both.
When there is no family or friendly connection between investor and entrepreneur, there is lesser to lose. But angel investors definitely want to know the entrepreneur in person to evaluate the qualities they want to see in entrepreneurs.
In simple words, they don’t want to build a personal relationship or invite you to a dinner. They only want to know you professionally through small talks.
These small talks and professional relations are also important as the infrastructure of investment has completely changed. Now, the small business entrepreneurs don’t deal with an individual investor but they deal with board of investors. There are two ways to get 50% of the deal before even meeting the investors on table.
Firstly, you need to build contacts with regional angel investors. It increases the possibility of seeing your contacts among the board of angel investors.
The second way is to prepare yourself to impress 5/5 angel investors on the table instead of 2/5. For this, organize a meeting with your financial lawyer, legal advisor, technician and other important members of the team to discuss all the business possibilities with expertise.
There are limitations to qualify for the role of angel investor. These include a net worth of more than $1 million and annual income of more than $200,000.
With tons of money in banks and wallets, the angel investors are not wild enough to take big risks. Therefore, they want solid valuation or real money. The pre-money valuation of $1 million to $3 million is considered ideal for angel investments in small businesses.
Angel investors are also more interested in profiles with real customers, real market value, real revenue, and legitimate valuation.
Simply put, they want to see a business that promises a bright future. For startup business entrepreneurs, solid valuation is defined as theoretical and action plan to convert documented business into real money business.
Plan of Action
High net worth people like angel investors can invest their money in real estate or public traded companies. But the reason that they invest in startup businesses is their experience and knowledge in business and desire to get involved with the growing market of small businesses. Being already aware of the financial upsides and downsides, they not only see your plan of action but also many other qualities including these.
Ability to Listen and Learn: A majority of the angel investors invest in their fields of experiences only therefore, they perceive themselves as mentors. They evaluate your ability to listen and learn so that they can involve in the business not only with money but also in making decisions. For entrepreneurs, it is mostly unacceptable to involve someone in experimenting with their ideas. The easier way out is to represent a moderate behavior, listen to the advice of investor and give your point of view in a controlled and sophisticated manner. Avoid negative communication words like starting your sentence with ‘No, Never, and But’.
Control and Dominance: Angel investors want to get hands on the pistons of engine by picking options for growth, choosing markets and taking decisions. But their business goals may be completely different from your goals. Try to find out a middle way in such a case or try to get another deal. It is highly recommended to keep maximum business control and authority in your hands to achieve the best out of your business goals.
Payout and ROI: The dream of angel investors is to pour thousands of dollars and make billions out of their small investments. This is one of the reasons that investors blindly poured money in growing social networks like Facebook and Instagram. Today, their investments worth of thousands of dollars are generating revenue of billions of dollars. In other words, the dream of angel investor is money and may or may not be business growth or expansion. It is not harmful for your business as you can achieve your other business goals by making bigger profits. Therefore, pick real numbers and show the real capacity of your business to make profits.
While angel investors are terminologically sanctified, at the end they are nothing but businessmen. The angel investors are always on the hunt of new investments and opportunities with small investments and capacity to make really big from them. This is why, they want exit strategy.
When offering your business proposal, make sure to include an exit strategy for angel investor to make them realize your corporate responsibility. The exit strategy should also include step-by-step plan to return the investment by making business prosper. For making it more appealing, include more than one business plan in the proposal.
In 2012, the worth of angel investments was $22.9billion in the US. Currently, there are around 300,000 angel investors working in the US. With so many opportunities and big markets, you can make the best out of angel investment deals simply by analyzing your business proposals critically. You will learn more tactics of improvising meetings with angel investors after experiencing a few meetings.