Hunting down angels
Well, I am not actually speaking of the godly creatures that some believe are up there in the sky. I would like to refer more of the guys with cash that are likely to invest in the next big thing, which might happen to be your idea.
After attending the great lecture of Richard Brandt, I feel the urgent need to write everything down and share it with you.
So, first – let us make it clear – we are talking about angel investors and not venture funds here. Angel investors, as we firmly pointed out in the very beginning of the talk are individuals or groups of such which review ideas and invest their own money in them. They are working people, just like you and me. They do not represent large equity funds and things like that.
Today we have particularly talked about how things work with angel investors in the United States. We have divided them into two groups – called East Coast and West Coast. Here are the differences:
The groups at the East Coast are known as the good guys. They are way more soft in terms of treating you and your idea. They are softer in terms of investments, as well. The average investment you can get from an angel investor or group based on the East Coast is $50k. They charge no fee to allow you represent your idea and they usually give you about 20 minutes to make your point. If they seem to be interested, they are likely to give you another 20 minutes, where they will ask questions. The East Coast guys are likely to have more patience in terms of getting their money back. We can conclude that they are more socially conscious and they can trade area or business niche development for getting their investment return later.
We then go and take a look at the (bit scary) guys at the West Coast. Damn sharks out there, but the average investment you get for a start is $225k and if you go through all their seeding rounds you are likely to get as much as $600k invested in your idea. They are busy, thus they charge you approximately $1500 (depends on the area, but average) to meet you. And when they meet you they give you 10 minutes to make your point. No more – no less. 10 minutes and you are out. They used to give 5 minutes for pitching at the beginning, but technologies developed further so 5 minutes were just not enough (like 10 is). They are likely to be way more impatient than their pals in the East. They expect solid return of investment in terms of maximum 3 years.
No matter which part of the United States you are looking for investment, though, there are couple of points that are pretty much the same.
1) Every investor cares about your exit plan proposal. Do make sure to include this in your presentation. You may put it on the last place, but make sure you reassure the investor he’s getting his money back. Simple. Either via an acquisition or by going public. Investors are not interested in getting long term attachment to your business (as long you are not having a Facebook-like idea) and they need to be reassured and reassured they are getting out with more cash than they brought in.
2) Do not address the potential market your idea is related to with big numbers. For example, the printing and scanning business in the United States is as big as $11B. If you go hunting an investor, with a proposal for entering that market with a product of $1000, considering you have to compete with Xerox and the other big guys – it will just not work. Try figuring out your target market – for example, if you enter the scanning and printing business with a product that costs $1000, but competes only in libraries with the big guys, who sell theirs for $4000 – this is whole another story. It will most likely raise interest.
3) Ideas are everywhere nowadays. Even you have the brightest idea, if you do not have the team to achieve it – then you probably are not going to make it. Make sure to stress out the strong sides of your company/team as much as you stress out on the idea. Investors are likely to invest on great leaders or techs rather than only ideas.
4) Learn English. Learn it well. Practice a lot. If you cannot present your idea clearly, no matter how good it is, it will probably never be funded.
The facts in this article I have extracted from the excellent speech that Richard Brandt gave on the Senzations 2014, day 2. I hope that you will find them helpful and you will get your project funded!