- You need to understand the difference between
Venture Capital companies and Angel Investors. If you are looking for your first round
of funding the chance that you will get the attention of Venture
Capitalists or Private Equity are about the same as winning the
lottery. Early stage entrepreneurs
are a much better match for Angel Investors, With that said, go learn about the Angel
groups you will want to introduce your business model to just like you
would for marketing your product to your target market.
- Create your business plan – use the templates
only for the index and set of topics to cover. The one Key element that entrepreneurs
need to focus on is: What is my competitive advantage in the market niche
and how do I defend it. Fully
answer this question and be prepared to discuss it in detail.
- Realize as an entrepreneur while your idea may
spawn the next great company, the idea by itself will not be enough to
secure any funding from an investor.
If you have not built a prototype and tested it for functionality
and feasibility with your intended market, your story will not resonate
even with the most sympathetic audience of Angel Investors.
- “It takes money to make money” is a law of
business. The entrepreneur’s axiom
is it takes money to raise money. Save your money be it from friends and
family or your own war chest until you have enough to thoroughly test your
business model/product in the niche and to go on the road to share it with
Investors.
- Make a list of Angel Investors and Angel Groups
that meet the test of five: a) they have money to invest, b) they invest
in products/business models similar to yours, c) they have made an
investment in the past 12 months, d) they have skills and a set of
contacts that you need to be successful, and e) you as the entrepreneur
and they as the investor are compatible (after-all you are getting a
business marriage)!
- If you do not have direct and substantial
experience in the industry/niche your product will capture share in you
will not have much credibility with the investors. One option is to hire someone that does
have such experience (pay later TBD).
- Recognize that raising Money takes time. For example, my associates and I are in
the process of raising funds for our PE fund and so far it is four months
and counting and we are 50% to our Goal.
- Know your self and Know your Angels – not exactly
a quote from the Art of Strategy but it still holds true. Many Angels want to make a ton of Money
and they believe if they invest in your project they will “Help” you make
it happen. Be prepared for the help
and set the expectations up front.
- You do not have any money until when? Until the Investors sign your attorney
prepared agreements, the attorneys prepare and file the appropriate paper
work, the Investors write the checks, the checks are deposited and the
checks clear the Bank and end up in your account. Therefore, the moral of this story is to
always recruit Angel Investors until you have the right amount of Money in
your bank account!
- You must have documented evidence of investment
of your own money in your own dream.
You will not get anywhere with out skin in the game!
Brian Graham
Managing Partner
Quintic Capital &
SunCoast Angel Investors
bgraham@quintic-capital.com
727-742-2546