What do Angel Investors Look For?
The UK startup scene is extremely competitive and understanding what appeals to angels could mean the difference between growing your business and leaving an investor meeting empty-handed. Every angels’ notion of an ideal investment differs and therefore, it is key to establish not only what you are asking for, but what your business offers your prospectiveinvestor. This may sound simple, but meeting the expectations of what an angel considers to be investableis one of the definingfactors to putting you on the path to success early on.
So what does being investable mean? Being investable is more than acompelling business story or an innovative solution, it is how you and the investor align, what you can offer each other and ultimately how they can help you scale your business. Below we have outlined the key angel evaluators you should consider when thinking about raising equity investment. Now, you don’t necessarily need to meet every point outlined below, but satisfyingat least five principles will be a great starting point.
- Solving a Problem – Does the product, technology or service address a real challenge in the market or society – what is the pain you are solving?
- Disruptive – Is it likely to be disruptive and make a real impact in the marketplace or establish a new niche?
- Protected – Does the product or technology have identifiable Intellectual Property? This may be patentable or may be in the form of copyright or branding or other intangibles – and can you confirm ownership?
- Competitive – Do you have a defensible market position? What other businesses are in competition with this project? How does it compare and what is the unique selling point or advantage – or does have first mover advantage?
- Revenue – How does your business make money? Are there clear identifiable revenue streams? Are there likely to be good gross/net margins?
- Scalability – Do you have a scalable business model? Are you able to achieve explosive growth?
- Proven Model – What kind of validation have you had in the marketplace? Are you already selling or has this been tested out with potential customers? Can you show proven results of market testing/surveys?
- Market – What is the market size? Can you achieve a realistic potential market share?
- Tax Relief Opportunity – Is the deal EIS/SEIS eligible and do you have advanced clearance?
- Exit – Do you have a desire and strategy for exit?
- Shares – Are you prepared to give up shares in return for investment and to have an investor on your board?
You may easily satisfy some of these points, but the difficulty is in whether or not you can effectively present how these principles fit within the framework of your business, which leads us to the next element, the pitch. Your pitch presentation might be one of the most difficult pieces of the puzzle, simply because there are so many factors to consider to effectively execute your presentation.
We’ll outline some of the core criteria here, but we recommend taking a look at some of our dedicated resources and tools to help you master your pitch. If you are more of a hands-on learner than theory-based, we recommend taking part in our 1-day masterclass, Inspiring Investment, presented in partnership with KTN, where you’ll have the opportunity to engage 1-to-1 with industry leading instructors on the start to finish investment journey. This full-day class offers not only a success-proven toolkit, but also insights from the angel and early-stage investor market and the entrepreneurial market alike so that you can really maximise your next investor meeting.
So let’s move onto the pitch. The length and format of your pitch presentation will vary depending on where you are presenting and to who, but every pitch will maintain the same core principles, which you need to master. Each of the points outlined below should be touched on when pitching, whether it is an elevator pitch or a 10-minute pitch, these principles are your heart of your presentation.
- Grab Attention – your time for presenting is limited and capturing your audience immediately is essential – consider using a question or a thought-provoking statement
- Filter – be specific about what you do and what you are looking for – this will help to refine your audience to those that align with your proposition
- Inform & Credibility – take the opportunity to state what can you do and why they should choose you
- Call to Action– what are the next steps?
- Contact details– who are you and how can you connect?
Now that we’ve covered what makes you investable and the principles of a good pitch, we’d like to leave you with some investor food for thought. What sets you apart from the extremely competitive start-up community is how well you stand out as a business, team or solution that an investor really wants to stand behind. Regardless of how well you present, how aesthetically pleasing your deck is and how prepared you are to answer questions, you need to have a truly compelling offer that the investor can’t say no to.
With that, we leave you to think about these 3 key investor standouts because what sets you apart could very well be thinking like an investor rather than an entrepreneur.
- Great Team-Do you inspire confidence? Do you have what it takes to build a business to exit? Are you truly committed?
- Truly Scalable-The harder it is to scale a business, the harder it is (or the more money you need) to grow. Without the ability to grow, you’ll never get investors their 10x+ return.
- Value Proposition-Do you stand above all other competition by an order of magnitude? Does your product bring meaningful savings or improvements to your industry?
If you are looking for more information on how to access investment, understand the investor market and master your pitch presentation, head over to Inspiring Investmentto register for our next 1-day Master Class.