How To Approach Angel Investors Successfully
Approaching angel investors for capital is always a tricky scenario. The question on most entrepreneurs’ minds remains whether they should just bootstrap their start-up and if it is worth it to bring an angel investor into their business fold. Angel investors are known to make one-time investments in start-ups. A few go on to become regular investors.
If you as an entrepreneur decide to go the route of an angel investor, there are a few things that you must keep in mind. Finding an angel investor that fits seamlessly into your company is the first hurdle. Once you find a like-minded angel investor that is interested in investing, convincing them becomes the next daunting task. In this blog, I would like to focus on how entrepreneurs can approach interested angel investors.
1. Look for investors that cater to your niche
Make sure you conduct your research on angel investors properly to see that they have extensive knowledge of your niche. Approaching an investor skilled in the healthcare industry will have little consequence to your business if the niche is in e-commerce. Angel investors are industry experts and as such come with a whole arsenal of knowledge and skill. Using that skill and knowledge to your advantage will only help your business grow faster and better. Start-up mentors are adamant about the fact that the business should approach those angel investors that can provide some guidance and expert opinions for your business.
2. A concrete plan
After understanding which angel investors fit your niche and will work well with the company, you must have a concrete plan to approach them. For this process to take place, having a concrete business plan is a must. It is extremely important to show what processes your business conducts as well as how the marketing, logistics, budgeting and timeline will work. For this, your pitch deck must be immaculate and not too long. For an angel investor to invest in your business your profile must be strong.
3. Know everything about your business
Meeting with an angel investor before knowing everything about your business is not just risky but plain stupid. You must be aware of everything happening in your company. You have to be especially well-informed about all things numbers. Your revenues, gross profits, profit margins, loss account, income statement, and financial position of your businesses are something you have to be well-versed in. angel investors like to know what they are getting into and ask about what they are getting into these numbers.
4. A valuation
Before meeting with an angel investor it’s important to know how much money you need and how much that money is worth. This is where valuation comes into play. For early-stage start-ups valuation of a business is a bit arbitrary. However, having a basic valuation in mind can be very helpful. It’s important to know the amount of equity you are willing to part with from your business to get the money you desire.
To sum up
Now that your approach has been planned out you can safely meet with angel investors. Be sure to make use of networking and attend investor and pitch events to better understand what angel investors look for in a business.
About Devansh Lakhani
Director of Lakhani Financial Services and a Chartered Accountant helps in start-ups funding India from his network of investors. He guides and advises start-ups to scale up by providing efficient sales, marketing, team building, and business management strategies. Being a business plan consultant he has executed fundraising by block deals on the stock exchange and conducted IPOs and right issues on the SME platform to the tune of over Rs. 50 Crore. He is currently working with start-ups from various sectors to help them channelize their business models and investments.
Check out a blog about Lakhani Financial Services written by Karo Startup here.