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Strategy of Innovation

Knowledge + Imagination + Entrepreneurship = Innovation = The key to guarantee our common future!

Entrepreneurs Seeking Angel Investors: READ THIS ARTICLE!

Who Are You Mr. Angel?

 

Gold-angel-wings1.jpgIf you are an entrepreneur seeking funds for your project, you have already read several articles, web blogs (here, here or here) or books about writing the perfect Executive Summary, Business Plan or Elevator Pitch. And you are now prepared to answer to all questions that investors could ask about your project such as the market size and the opportunity, the problem, your wonderful, unique and innovative solution, your competitors, the financial forecast … but it is not enough! You are not yet ready to present your project to a potential investor.

Of course, you may know that market research can help you to know and to understand better your customers. You ask them questions about what they prefer, what they use, why, when, where they use or work with a product and not with another … all these information help you to understand your customers, and the goal of market research is to offer the best product to fit the customer needs. If you are convinced by that, you should also consider your potential angel investors as a potential customer.

Disclaimer: I am not saying you to use your "BtoC salesman pitch to sell your "product" to an investor". He will hate that, and you will lose your credibility!

Yes, an angel investor is also a customer, but a very particular one. If he is seduced and convinced by your project, he will buy a piece of your company to become your partner! Consequently you have to know and understand him/her before marrying with him/her!

Do not be shy! Ask the what-who-when-where-why questions to your angel investor. He will appreciate that you take care about what he wants, what he is looking for and what he is expecting for your common future.

Hereafter, I propose some questions to ask directly to your potential investor, or indirectly by searching about him (thanks Google!):

  • Is your potential investor a member of your family? A friend? A close relation (a friend of a friend, a professional relation)?

Yes: The following questions remain fully valid for your family, friends and close relation!

No: How did you connected to him? Is he a member of an Angel Investment club or network? If yes, which one? You could find a lot of information available on their web site.

  • Do you know his track-record?

No: could you obtain the following information about him? 

  • Has he already invested into startups? Is he a first-timer or a serial-investors?
  • In which projects/startups has he already invested? And what were the amounts of investments?
  • In what kind of projects? Business service, high-tech, hardware, software, biotechnology, clean-tech …
  • Is he willing to invest into startup based far from his home, or commit to relocate to another county or country? (Believe me, this question is important!)
  • What was the percentage of equity he has got in each company he has invested?
  • At which economic stage of the life cycle of the company has he invested?

At seed-stage, early-stage startup, later-stage startup, established young company (meaning having revenues and positive cash-flow), or growth stage?

  • What is his investment capacity? How much can he invest in each project?
  • Has he right now the capacity to invest? Or will he need some time to liquefy his assets? How long?
  • Is he willing to re-invest further money in a second round of investment if needed?
  • What kind of angel investor is he? Is he a hands-on (active) or a hands-off (passive) investor?

If hands-on: what is his function in the management of startups he has invested in?

If hands-off: nevertheless, is he willing to bring his support and help to your business development? If yes, does he have a particular skill or an active professional network that could be useful to you (IT, Finance, Marketing, Emerging Market …)?

  • How did he exit from startups? Did he sell his stocks to the founders? To other angels investors? To a Venture capitalist? To a bigger company?
  • How long did he keep his stocks before exit? 1, 3, 5 years of more?
  • What are his motivations to invest into a startup?

 

               Personal motivations to invest into a privately-held company

  • to perform a capital gain at the exit
  • to receive dividends (usually, investing into a startup will not provide dividends)
  • to have income tax reductions (in some countries, private equity investors can have tax reduction)?
  • to participate in an exciting entrepreneurship adventure
  • to have a glance at emerging companies which could compete (or complete) with his own company

 

  • Until now, is he happy to have invested into startups? If yes, why? If no, why?

 

This list of questions is not exhaustive, and you should adapt it to your targeted investor(s). Furthermore, these questions are “rational” questions, and you may know that in marketing the emotions, feelings and instincts are more important in commitment than rational reasoning. So, if you can obtain from your potential investor an information about what he likes (food, drink, sport, hobbies, books, cinema, …), you could find a potential link between your project and his emotional brain (in practice, try to network with angel investors before officially asking them money). 

To conclude, if you know the name of startups in which your Angel has already invested, try to contact the CEOs of these startups. Ask them 1000 questions about their fund raising (term sheet, due diligence, start-up valuation …) and their feelings about their Angel investor(s)! Are they happy with him (them)? 

Good luck!

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