November 17, 2009

8 Quick tips to help you raise money from angel investors

1.  Passionate, experienced, trustworthy management team:  an investor is looking to invest in the jockey, not the horse.
2.  A business idea that is scalable:  ask yourself… “can I hit $10M in revenue in 3-5 years?”
3.  Traction: especially in today’s economy, you need to have established some “traction” (revenue, contracts, technology developed, patent, etc.).  In other words… it needs to be more than an idea.
4.  Sustainable Competitive Advantage: you should be able to easily explain why your product/service/company has an advantage to any one else in the marketplace (and how you can sustain that overtime).
5. Market Need: Is there a real need in the market or are you creating a “nice to have” product or service?
6.  Right valuation: Too many entrepreneurs shoot themselves in the foot by pitching an realistic (i.e. too high) company valuation.
7.  Exit Strategy: Because early-stage investing is very risky, most investors are looking to get their return within 3-7 years.  You’ll want to be prepared to explain how the investors will get a healthy 10x ROI in 3-7 years.
7.  Be Prepared: The most prepared entrepreneur (without a great company) will not be able to successfully raise capital.  However, if you have a great company and you approach investors without being prepared (executive summary, investor presentation, financial model, etc.), they will quickly throw you into the “half-baked” category and it will be difficult to overcome that stigma.

Good luck!

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