Once you managed to find angel investors, you need a proper strategy for talking to them. Most startup founders struggle talking to investors. They wonder what to say and when is the right time to ask for funding. As a part of our Startup Survival blog series, we prepared a list of tips for you to make that process as smooth as possible.
1. Treat angel investors like humans
You’re looking for a human connection. Instead of just throwing words at investors, you should have an interesting conversation. You’re looking for smart money – capital, knowledge, background, network, guidance. In return, the investor is looking for a rewarding investment.
Get to know the people that might invest in your company, ask questions. If you’re not at all interested in what the investors have to offer besides money, how is that going to look?
2. Get them interested
Don’t try to squeeze your entire business plan into one sitting. In the first 30 seconds, you want to explain clearly what you’re doing, how far you are, and what the potential of your business could be. Metrics are key here: interviews are nice, but actual signups are a lot better. In the European ecosystem, revenue is the best type of metric, while vanity numbers don’t play an important role – it’s cool that you have 10,000 followers on Facebook, but do they pay money?
Here’s an example: We’re the Airbnb of camper vans. We’re active in the Netherlands, Germany, and France. We’re making €12K per month and plan to expand to the rest of Europe. That’s 30 seconds. Angel investors can only evaluate if you’re good if they understand what you’re doing. It’s also a good idea to show an MVP, a photo, a video or a prop.
You usually have a small window of opportunity during the first meeting. You want investors to leave the conversation thinking: ‘That was cool.’ Maybe even giving them your email because you want to send your one-pager. It usually goes – first meeting, one-pager, pitch deck, 10-pager, term sheets and contracts.
3. Build up interest over time
Even if the investors are interested, it doesn’t mean they’ll invest. You’ll lose people on the way. And the person who said was interested today might not be an investor of today, but an investor in the second or the third round.
Never close the door on a potential investor, keep them in the loop. Talk to them now and then and share your updates. Passively show them that you’re growing over time. Once you are actively fundraising, you can go to all these people who are secretly a fan of you, because you’ve been telling them that your business is doing great for a while, and ask them if they’d like to have coffee. Talking to investors is less of a quick sell and more of building a relationship.
4. Talk to their network
Talking to angels also means talking to their spouse, or investor friends. You’re always talking to the decision group behind him/her. An investor might be the representative of an angel club. Or it might be that before he/she can invest, you need to come to visit their spouse, and they need to like you as well.
5. Look for a group of angel investors
It’ll be very tough to find all the components of your ideal angel in one person. Also, an ideal investor of today is not the ideal investor of tomorrow. You need a good contract and structure that deals with this issue. Leapfunder solved it by creating an SPV (special purpose vehicle), so investors can invest individually but be grouped together. That way the startup gets more smart money on board. If you still haven’t, present your startup to the largest angel investor network in Europe.
6. Stay away from these NO-GOs
Relying solely on buzzwords such as blockchain or machine learning is a no-go. Having a pitch with no substance will scare people off. Angels need to clearly understand what and how you are doing in 30 seconds.
Never lie to a potential investor, because they will find out. Always be honest and transparent, even when it’s bad news.
If you’re chasing the investor and they’re not responding, you have to stop that. It means they’re just not interested. If you’re communicating that you are doing well and they’re interested, they will respond.
When talking to investors, never let them determine when you should fundraise. Your business should determine when and how much. Don’t get greedy. If someone is waving €200K at you, it doesn’t mean it’s a good deal. The terms or the amount of shares you’re selling might be bad for you in the long term. You don’t just want to consider this funding round but the next ones as well.
If you want to make sure you’re prepared for investor meetings, join our Investor Readiness Session, an online workshop that answers all of your questions regarding how to successfully speak to investors and raise funding.
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