Keys to attracting Angel Investors

29 May Keys to attracting Angel Investors

As a Certified Public Accountant in the greater Asheville, NC market I am blessed to see a lot of start-up companies. As I mentioned in a prior blog, many of my clients are small business owners or solo-entrepreneurs. As they grow their business, they find that their ability to grow is limited by their personal checkbook (or those of family and friends). It is especially important in the manufacturing environment, where there can be a need for a massive capital outlay, to build up a network of potential investors. Some call these investors VC (Venture Capitalists) and some call them Angel Investors. Regardless of what you call these people, I think it is important to “think like an investor” so you know how to attract an investor. It reminds me of the old saying “Birds of a feather flock together”.

While reading the book “Winning Angels the seven fundamentals of early stage investing” written by David Amis and Howard Stevenson I took an interest in Tony Morris’ approach to investing. Tony has been in the IT entrepreneur since 1979 and through those many years he has invested in 19 different start-ups and early-stage companies. His approach to the process took the form of a “To Have List”. As an accountant who loves to check things off her “To Do List”, this approach held great appeal to me.

Companies must have:

· Match of interest and experience

· Management team A++

· Big market opportunity, rapid growth to $1bn+

· Scaleable concept $100M in year 5

· Compelling business model

· Concise and convincing differentiation

Companies ought to have

· 2 customers already identified

· Draft business plan

· Demo version of product

· 2-4 people already involved

· Entrepreneurs that know how to use advisers

Companies Nice to have

· Revenue

· Track record in this kind of deal

· Good advisers

Must avoid

· Dishonest entrepreneur

· Self-destructive ego

· Lifestyle Entrepreneur

Ought to avoid

· Empire builders

Nice to avoid:

· Inexperienced CEO

Being an accountant who looks at financial statements all day long, I thought it was of particular note that he considered existing revenue as simply a “nice to have”. When you think about funding sources from either traditional sources like banks or by small business alternatives that offer micro loans to start-up companies having an existing proven revenue stream, even a small one, is nearly always required.

So, now that we know what this experienced investor looks for in a target company, I think it‘s time to build a plan around those concepts so that you can either be prepared for a lucky chance meeting with an angel investor or so that you can actively pursue investors. Below I have listed what I would consider an action plan for a growing start-up.

Start-upCheck List for Attracting Investors

· Make sure you have 2 to 4 people on your team ensuring each of those people are A quality players in the industry you serve

· Develop a demo version of your product

· Draft a business plan

· Create a network of advisers who compliment your interest and experience

· Create a 3 to 5 minute speech that tells your story about why your product/service is compellingly different

Other Blog Posts of interest:

Funding for Small Businesses

Small Business Retirement Plan Options

Leveraging your retirement savings

Hobby Loss Rule for Small Businesses

Women in Business

New Business Start-up Tips from a CPA