The 5 Things You Must Do Before Approaching Angel Investors
Setting a machine into motion is the hardest part. Once it begins moving, you can keep improving the speed to maintain the momentum. The formula is quite similar when it comes to starting a business from the ground up. The initial establishment phase is mired in financial deficit which places umpteen functions in the doldrums.
The reason is lack of funds and working capital, which puts the business at the risk of closing down even before it has been able to spread its wings. In such cases, financial institutions are often cautious and avoid giving loans to start-ups as they do not have substantial evidence to prove the future profits.
Also, they do not have substantial collateral for security to satisfy the lenders. This is where the angel investors come into the picture with funding in exchange for an ownership stake in the business. However, many entrepreneurs are not sure about the ways of approaching a high-net-worth individual who would be willing to invest in their venture.
If you are planning to start a company or purchase a flourishing business for sale in the United Kingdom, then you must be aware of the things that must be done before engaging an angel investor. Here is a list that will make it easier to make the move with confidence and win over a potential financier.
1. Make Your Idea The Star Of The Pitch
The way you present your business concept, vision, mission and goals is the defining moment of your deal. The idea behind the venture must resonate with the angel investor as an impressive start-up which has capabilities of becoming a thriving enterprise. Your confidence supported by hard facts is the first step towards clinching the deal.
You must have the required data and figures to back your claims and forecasts. A clearly defined business plan will result in the creation of the desired presentation that is replete with customer profiles, product or service offering, competitive edge, marketing plan, budget and expected returns in a few years down the line.
Don’t take the leeway of altering the numbers based on your presumptions. The whole plan should be incorporated after meticulous market research to come up with the idea that bridges the current gap between the customer’s desires and marketer’s offerings. If you are able to convince the investor that you can successfully cater to this segment and generate revenue in the long-term, then you can get the funds.
2. Research About Your Investor In Advance
Don’t make the presentation to a complete stranger. You got to know about the person and his background before you head for the meeting. You must know his taste in business investment and the industrial fields which he/she might prefer over others.
Learn about the investment portfolio of the individual and his recent endeavours to get an idea of the interests and inclinations. Go through their personal profile to set the tone of the presentation. All this research will boost the chances of getting a positive response from the angel investor who has shown a liking for your start-up idea.
3. Represent The People Behind The Venture
Although the prime focus is on the business idea, angel investors also have a keen interest in the team working on the execution of the business plan. If they are not satisfied with the calibre of the management, they might not be interested in a foolproof plan. Thus you need to find people who have the talent and experience to build an empire from scratch.
Highly committed, skilled, determined and hard-working individuals are needed to transform ideas into tactical operations. The experience and aptitude of your team will be a significant decision-making factor when the angel investor goes through the presentation.
Thus you must have seasoned people onboard who are suitable for your business and can provide the much-needed insight and control.
4. Discuss Utilisation Of The Investor’s Funds
It is quite evident that when an angel investor is putting his money into your start-up, he intends to know its utilisation. You must be able to provide a concrete roadmap in your pitch deck of how the capital will be used to achieve growth and development.
You will have to present an average quarterly expenditure plan to the investor, which should give a broad understanding of the financial model for the next three years. Also, a monthly expenditure plan for the first year needs to be drafted to give an insight into the finer details of consumption of the funds in the initial stage.
Additionally, you must be able to shed some light on the money-spinning initiatives that will be taken to reach the break-even point quickly. For this, you will have to create key milestones to be achieved in the first few months. It will also help the investor to keep a tab on the progress of the business.
5. Be Ready For Conflicting Views
You cannot prepare for a one-sided monologue when you are creating the presentation for the angel investor. The financier will be asking a lot of questions and you need to be equipped to answer them with a persuasive flair. You need to create a story that can be easily remembered and use a visually arresting pitch deck to help you with cues.
The statistics and business model must be presented in a comprehensive way and the significant details must be spelled out in a concise manner. Keep the interests of the investor in mind while framing answers for FAQs and steer clear of the mistakes that can tank your marketing strategy.
Your confidence in the endeavour is the best weapon in your arsenal which should be exploited to influence the sponsor. They are usually flooded with such proposals day-in-and-day-out and that is why you need to put a deal on the table that cannot be resisted.
Whether you decide to build a start-up or buy a business for sale in the United Kingdom, you need to be aware of the financial needs of running a company. This is the reason why you must keep the above-mentioned tips in mind when approaching an angel investor for seed funding.