Pitching the Critical Numbers to Angel Investors

The most important attribute you must add to your pitch for investors is a complete understanding of the financial opportunity. Angel investors want to know more about what’s in the deal for them. Details about your company’s product convey benefits for customers. Although this is important, you should limit that part of your pitch to investors to a few words.

Concise explanation of even complex technology demonstrates the possibility of simplification. That’s a beneficial circumstance for marketing of your company’s product. It’s also a shortcut to telling investors how your technology works.

Angel investors mostly need details about how much capital is required, what accomplishments are expected with it, and how much equity they receive. That requires understanding of the financial projections and a reasonable valuation of equity for investors. Fortunately, entrepreneurs can become financial leaders of their corporations without becoming financial experts.

A competent adviser can review our cash flow projection for comparison to the assumptions about corporate achievements. The resulting cash generated should reflect a reasonable value for the equity given to investors. You are then left with having to thoroughly describe the critical numbers in the projection and justify them.

The first figure to defend is cash adequacy. Spending money precedes making money. You need to understand the company’s projected cash position for the end of each month. Capital provided by all sources must adequately fund expenditures without leaving any deficits. The business also needs a little cushion. So explain to investors how the capital raised accounts for all reasonable expectations.

The month-end cash positions should gradually increase. This means the corporation is generating positive cash flow. Rising cash continues until the company’s next round of expansion spending. Remember to account for delays in payments from customers. You must prove to investors that you will pay the company bills on time and monitor when customers are paying. The resulting cash flow projection reveals how much time passes until the next input of capital is required.

Recommended Reading:

This entry was posted in Startups and tagged , , , , . Bookmark the permalink.