Are You Ready for Angel Investors?

Is your company “really” investor ready? Do you know how to market and sell to outside investors? Do you have a sound financing strategy? Here is what Anita Roddick, founder of The Body Shop, once said: “There are only two ways of raising money: the hard way and the very hard way.”

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New York Times Article: In Pitching to Angel Investors, Preparation Tops Zeal

For entrepreneurs hoping to land start-up capital from angel investors, here is what two recent studies found: Don’t get carried away when you pitch your product, because the investors may lose interest faster than you can say “almost unlimited market,” The New York Times’s Brent Bowers reports in this article.

What angels are looking for, authors of both reports said, is evidence of a market opportunity with growth potential, a strong management team and an exit strategy, including a list of possible acquirers, since the eventual sale of the companies they invest in is how they make money.

“Also, angels put a high value on trustworthiness,” said Richard Sudek of Chapman University, a former entrepreneur himself and the chairman-elect of Tech Coast Angels, the largest angel group in the United States based in Southern California. “If you don’t know the answer to a question, say so, and promise to get back to them. Don’t fake it.”
>>Read the Article at New York Times

>>Read Related Article at BusinessWeek: Perfecting the Fund-Raising Pitch

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ValuePoint: How To Get Ready for Angel Investors

Tech Coast Angels
Network of over 200 angel investors with a mission to fund early stage technology ventures in Southern California. Group operates three regional networks in Los Angeles, Orange County, and San Diego. Provides seed and early-stage capital in the range of $250K-$2M, an investment range not generally served by VCs. Since 1997 they have invested over $45 million in more than 60 Southern California companies, together with $456 million from co-investors. Their members are founders, CEO’s, venture capitalists and business leaders who have funded and built world-class companies. They mentor and coach, serve on their boards, provide contacts, and assist with team building, strategic planning and fundraising.
>>Learn More

What are Angel investors?
Venture capitalists invest in more established ventures, but informal angel investors are the primary source of early stage risk capital for entrepreneurial ventures in the United States. Angels are private individuals that invest their own wealth in entrepreneurs who are not directly related to them through family or prior friendship, with the mindset that they will get higher returns as the ventures get “discovered” down the road by an attractive buyer.

Perfecting your Fast Pitch
It is this simple: First moments matter most. The whole point of your Fast Pitch is to get investors interested enough in you to get their business cards and to agree to meet with you at a later date, or at least to get them to refer you to someone else who might be interested in your deal. Jason Salfen, at MIT’s Sloan School of Management Entrepreneurship Center, puts it succinctly: “You don’t need to reel them in, it’s just getting that initial hook.”

Investors know that the way you will engage your initial customer base is through a Fast Pitch. It is the same for attracting strategic partners and even recruiting executives, which means that in general, the investors know that entrepreneurs best suited for funding can usually articulate their venture’s value proposition within a sentence or two. If it is more complicated than that to explain, it is probably not ready to be funded. So once you have your Fast Pitch down, be ready to catch the fruit as you shake the tree.

Special Guide for Raising Money From Venture Capitalists and Angel Investors
The world of venture capitalism has its own language, its own process, and its own methods of communication between entrepreneurs and potential investors. All entrepreneurs must go through the formal venture drill when raising money from outside investors. Just take your time to carefully research and understand how the private equity, risk capital, venture capital works.