After developing a great product, the entrepreneur’s burden is delivery to the market. And that requires operating capital.
Companies with a flashy product for a vibrant market attract the venture capital firms. But what about a fledgling business with only a prototype that’s intended to bring progress to a stodgy older market? That means forgetting about venture capital and locating individual angel investors.
That’s a little easier to come by than most entrepreneurs realize because their monthly cash need is often fairly small for incorporating the business, a few key employees using shared office space for a pieced together network of computers. Entrepreneurs are social people, which is a quality that’s related to their confidence and independent nature. They only need to apply that characteristic to finding investors among their wide circle of friends plus utilize their social skills to make even more friends.
Those experienced in such endeavors know that the process to follow involves appealing emotionally to investors, not dazzling them with business details. Studies in behavioral finance indicate that people take more risk to avoid loss than to capture gain. This means that wealthy individuals keep large chunks of cash off the table. That money becomes investment capital by framing a discussion around investor goals.
Wealthy investors know they have more options and want involvement in the process of managing their financial affairs. By offering that, an entrepreneur appeals to angel investors as a friendly confidant. Investors are empowered with being insiders in something that is too exciting to miss. Successful discussions center on that issue rather than financial specifics.
Of course, companies must send investment updates. But even most of that is not financial. This is why annual reports of major public companies start with a lot of pretty pictures and glowing prose about recent achievements. The dull financial facts are always in the back…for anyone who actually reads that far. Investment updates, phone calls, and press releases build positive sentiment. This permits entrepreneurs to locate names of new angels. They are usually friends of friends. An entrepreneur using angel investors never stops working his list of names. It usually contains 100 or more contacts. Even before money is needed from investors there is frequent email sent, constant business lunches, and perpetual phone calls.
Everyone the ambitious entrepreneur meets is a potential investor or lead to an investor. Surprisingly, everyone wants to help. That’s because everyone wants involvement in a success story. Appealing to that nature is key to raising money from angel investors. People want the company to succeed and they are willing to help. This is what permits companies in money-raising mode to leverage relationships.
Before an entrepreneur can unleash tenacity and enthusiasm on customers, capital is required. The obvious capital acquisition plan is therefore deployment of entrepreneurial passion and confidence toward investors. In fact, a company with all its key executives involved in this pursuit is even more inclined to succeed. It starts with knowing the product and the company pitch. That’s followed by conveying a drive to succeed that angel investors find infectious.