The screening process by angel investors can appear intimidating. It also leads to frustration by those companies that fail to obtain funding after selection to provide formal presentations or reach the due diligence stage. Fortunately, there are steps for entrepreneurs that improve their success during this process.
The most critical first step to obtaining angel investors is incorporating your business. A corporate structure is required for angels to share in the company’s equity. Don’t delay incorporating. Do it before you start to raise capital.
The next step is assembling an experienced team. Having a great idea is less important to angels than the managers who will deploy the capital to deliver the company’s idea to the market. If the company’s founders lack experience, outside advisers are crucial to raising capital. Successful funding requires people with leadership experience in the company’s industry.
A company seeking angel investors should already have a website. Content and layout of the website should provide a feel for the company’s style and tone. Reserving the company’s name on social networks is also beneficial for future marketing efforts.
Companies without a working prototype are unlikely to receive angel funding. Entrepreneurs should bootstrap their companies by borrowing from friends and family in order to have a tangible product. Most angel investors expect at least a prototype rather than a plan or design. Next, validate the company’s business model with at least one sale.
Having a one or two page summary of your company is essential. Investors expect to have an overview of the company’s business model before proceeding to examine details in a PowerPoint presentation. The purpose of the summary is emphasizing points that are important to an investor. This includes the company’s personnel and market approach. Provide the feedback from a customer sale that describes the advantage provided by the company’s product.
Then, a high-power business plan is required. This document details specific strategies and risks along with plans of action for the use of capital. The business plan also requires a financial model that quantifies results of reaching projected goals. The projection should incorporate the outside funding required to achieve the stated objectives.
Making contact with potential investor connections is important before money is requested. Build a network of knowledgeable individuals. Seek their input as you prepare for getting noticed and accepted by angels.