What Angel Investors Want

Finding funding in the cutthroat world of startups is your business’s ticket to survival. Only the fittest will attract the angel investors with capital. In order to convince FundingUniverse.com’s angels that your venture is a perfect match for them, you must clearly present them with a focused view of your potential. In order to get funding—in order to be successful—your business must build this focus from day one. Most important to the angel during his/her hunt is the character of the entrepreneur. 1) Enthusiasm 2) attention to detail and 3) a displayable amount of responsibility will play to your advantage as investors sort out the trustworthy entrepreneurs from the other enterprisers bound to fail.

RETURN ON INVESTMENT

Because investing is high risk, angel investors are looking for a high return on their investment.  Remember, an angel could put her money into any other investment out there (real estate, stock market, mutual funds, etc.) so you need to make sure that you are communicating a compelling case!

THE IDEA

No matter where or how it hit you, the big idea falls into one of three categories:

• An idea you love that has the potential to be successful in your market
• An idea you love that has potential to be successful in an inaccessible market
• An idea you love

Angels are only interested in those ideas that fit under the first category. It’s up to you to strain out all others. Here are some key questions to ask yourself before you get invested:

• Is it something you know well?
• Is it something you can do?
• Is it something you would like to do, day in day out?
• Is there a market for your product/service?
• Are you able to penetrate this market?
• Do you have the initial resources to begin and keep the business running until it can start yielding a profit?
• Can your employees feel empowered? Can they feel like what they do makes the world a better place?

If your great idea fits the criteria, congratulations! You’ve convinced yourself to invest. It’s now time to start building a company that others will be willing to invest in as well.

POSITIONING YOURSELF 

Above all else angels are looking for two characteristics in entrepreneurs:

• enthusiasm
• trustworthiness

In the following articles, FundingUniverse.com suggests several ways that you can position yourself to reflect these qualities, starting with setting goals.

SET GOALS

Setting goals is the first way to focus your direction, thereby building trust. Your goals should sum up the future of your company, where it fits into society, and what it will offer stakeholders as it matures. These goals are often sweeping. You must create objectives that will guide you to work to accomplish your goal.

SET OBJECTIVES

When setting objectives, both long term and short term, be sure that they fit these four criteria: SMRT

• Specific
• Measurable
• Realistic
• Time-bound

Specificity ensures that you’ve done your research and are willing to risk failure. Vague objectives will turn an investor off immediately. Measurability reflects a willingness to be held accountable for the future of your company. Specificity and measurability provide a mirror in which you can track your progress without the excuses or obscurity that plague many start-ups. Be realistic in your objectives. It’s no coincidence that objectives and objectivity are derived from the same base word. Angels are not interested in trumped up numbers, and will interpret your figures in one of two ways: either you are 1) deluded or 2) not trustworthy. Both perceptions will leave you without angel capital. Finally, time-bound objectives provide projections. One question every investor will be asking themselves as they review your company: When can I expect a return on my investment? Some angels are willing to wait longer than others for this return. Making your objectives time-bound is an excellent way for you and FundingUniverse.com to find the right angel to invest in your company.

THE MARKET

You’ve decided there is a market for your product/service. Now it’s time to do the market research to prove it. When you present to an angel investor, they’ll want to know your company’s potential. A few things to keep in mind as you present your research:

• Find a particular niche and tighten your focus
• Be realistic
• Choose to present the most optimistic view within the bounds of this realism
• Don’t base your decisions on predictions that the market is on an ‘up-swing’
• 94% of angel investors like to invest close to home, does your product/service have a local market you can concentrate on?

WHAT'S IN A NAME?

You need to find a name—the name—that will get you running before you can create letterheads, business cards, websites, and other tools to give you business the professional appearance it needs to be taken seriously. According to Art of the Start author Guy Kawasaki, there are several things to keep in mind when naming your company:

• Does the name give the consumer an idea of what service/product your company produces?
• Avoid numbers
• Sound different (bad examples: Clarins, Claris, Claritin, and Claria)
• Naming trends will come and go—name your company as if it won’t
• Where does your company fit in if someone uses alphabetical order? Will it come first or last in phonebook or professional directory?
• Really successful businesses’ names become verbs . . . does yours need this potential? Does it have it?
• If you plan on using acronyms, remember this as you pick out your company name. Otherwise, acronyms may not be an option for your business (trust us here at FundingUniverse.com).
• Does the name have logo potential? Try it out.

MANAGEMENT TEAM

Your management team is the most important element of your business. Many angel investors will choose to make an investment based solely on your management team. Where one member is lacking in expertise, another should have strength. People are drawn towards those with whom they have the most in common. This kind of action in recruiting a team will leave you unattractive to investors. Consider the following when recruiting a management team:

• Is this person enthused about the company’s goals?
• Does this person have individual strengths to add that aren’t covered by another member of your team?
• Is this person’s character trustworthy?
• Is this person willing to take risks?
• Is the candidate committed to your goals and objectives?
• Does your management team have chemistry? Can the personalities work well together?

LEARN TO BOOTSTRAP

Few things earn an investors trust like showing that your enterprise can do more with less. Weed out everything that doesn’t directly help accomplish your goals. What will help you achieve your specific, measurable, realistic, and time-bound objectives? It can take months to find an angel investor that fits your company. Plan on financing the venture as long as possible on your own. The stronger your company without the investment, the more likely you’ll attract the right angel investor.