How to Pitch to Angel Investors

How To Pitch To Angel Investors

If you’re not sure exactly what an angel investor is, simply think Dragons’ Den without the drama. They’re an essential part of the business funding landscape and are usually wealthy individuals or even businesses themselves, that provide funding to start-ups and businesses looking to grow and expand.

But as with everything in this world, nothing is free and so angel investors offer financial support in exchange for a share of the equity of your business. That means if your business does well, then so does the angel investor. It is not an altruistic process, but one of faith on both sides. 

However, while an angel investor must take a leap of faith in some respects, they will be able to offer guidance and support to businesses as well as the opportunity to access their network of business contacts and knowledge.

How to secure funding from an angel investor

If you’re seeking investment from an angel investor, there are two things they need to understand:

  1. That your business can go the distance
  2. What you still need to develop in order to get there

To achieve that, honesty is key, and it is crucial that you know your business and its past performance like the back of your hand.

As well as honesty and a clear understanding of your business market, an investor will want to see:

  • Drive and passion – when it comes to parting with their cash, investors need something and someone to believe in. Your passion and personality could be everything you need to convince them that you deserve a chance
  • Clarity of purpose – know your customers, their problems and the solutions you offer. Perhaps you have a personal story which led you to develop your business in the first place.
  • Evidence of demand – now you know you solve a problem for your customers, can you provide evidence of demand? Even if you’re still very new, there are ways to evidence traction even if it’s through social media following or email subscribers.
  • Know your numbers – you might be quizzed about gross and net profits so ensure you go through your figures. You might also be asked about how much it costs to create your product and what it retails at so having these figures to hand is vital.
  • Make it personal – it’s likely you’re investing to another business owner who has been on their own business journey. Ensure you do your research and learn about who they have invested in before, what sort of return on investment they might be seeking or what they might be looking for.

Involve the wider team

It’s highly likely you are not on your own. You might have a team behind you that has helped and supported you in getting this far. It’s often noted that investors invest in a team and not just an individual. Therefore, if you have a wider team, don’t leave them out of your pitch. Make sure you mention them and how they have worked on and in the business. You might even want team members with you if you don’t have to pitch alone.

Quite often on business journeys, the best partnerships are based on relationships rather than ideas. A great team can make an idea work. A great idea might not always make a team work; so teams that work well together are highly desirable to investors.

Your cash flow plan

We’ve discussed knowing your numbers but knowing your forecast is essential. In fact, it’s arguably the most important element of your business plan. And that’s because money is at the heart of everything. It’s why you’re pitching to an investor…

If your business is without the potential to make a profit, then it’s not a business

You need to know exactly what is coming in and going out of your business and that you will be able to cover expenses without having to turn to the investor later on.

What angel investors are ultimately looking for

  1. An idea that will generate cash flow
  2. A person or team they can believe in
  3. An industry they are familiar with
  4. An idea or product with a large market and a competitive advantage
  5. A company with momentum or traction (if it’s still in the very early stages of growth)

Many small businesses give up before they’ve even started or worse still, they play it small because they don’t believe their ideas are unique enough. But you don’t need a great idea. In fact, great ideas are ten a penny. What many small businesses lack, which you don’t, is the drive to work hard to bring them to fruition. 

Good luck!

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