If you are an entrepreneur who is attempting to commercialize a product or service, then you know that you almost always need money to assist in developing your idea. There are several traditional sources for these funds. The first and most obvious source is yourself. You may also solicit friends and family. After you’ve exhausted these options, the most traditional funding source is angel investors, who generally put in the first “outside” money. These angels may be affiliated with an organized group or act individually or with friends and colleagues. Angels are always looking for good deals and, assuming that you have taken the appropriate steps in advance, most of them will at least evaluate your idea, generally (but not always) without charge.
Make sure you can clearly and concisely articulate your request. The best first step is to prepare and practice -- over and over -- an “elevator pitch,” so named because it is what you would want to tell a prospective investor whom you might meet in an elevator and with whom you would have approximately one minute to make a compelling case. This pitch is designed only to interest the angel so that he or she will want to talk to you further. It is not the request for funds.
Make sure that your elevator pitch contains all the important information that will make an angel investor excited enough to give you a meeting. It should identify the problem you’re solving and your solution. If you have intellectual property, make sure you mention it (no need to explain it). State the size of your market -- generally in people and dollar value -- and the portion that you are focusing on. Identify how much revenue you’ll have both initially and after 3-5 years. If you have prior experience as an entrepreneur, particularly growing a company mention it. If you have experienced members of your team, say it but you need not mention their names unless one happens to be well known. Finally, say how much money you want. Don’t ask for more than you need, but don’t ask for too little, either. Angels do not like to underfund entrepreneurs who run out of funds quickly and have to come back for more money.
Prepare a clear and concise Power Point presentation. Angel investors are used to seeing a Power Point. It is something that they can look at quickly to get a more complete view of your idea and how you want to commercialize it. Your presentation should consist of no more than 12-15 slides. It is something that they can look at quickly to get a more complete view of your idea and how you want to commercialize it. Your presentation should consist of no more than 12-15 slides. You are likely to get no more than 15 minutes to make your presentation and you should have no more than one slide per presentation minute. You might also prepare a narrative “executive summary” of approximately 2-3 pages.
Now you’re ready actually to find an angel group from whom to seek funding. A terrific source to identify angel groups is the Angel Capital Association, an alliance of many of the 265 angel organizations in the United States and Canada. Its members are listed under “Directory” on the ACA web site, www.angelcapitalassociation.org. There you can search nationally or regionally. Clicking on any angel organization’s name will take you directly to its web site. On that site, you will usually be able to find the key information you’ll need to see if that angel organization is right for you, including whether that group will review your request without charge.
Once you have identified the angels to whom you’d like to apply for funds, follow the instructions on those groups’ web sites. It is not inappropriate to seek funds from more than one group at a time. Each organization’s requirements are different, but usually you will have to complete an on-line application. Some angel groups will almost always give you a first -- short -- meeting, so long as your idea is not clearly unreasonable; others are more selective.
After the first meeting, the angel groups will select those potential investments that are the most attractive. If your investment finds interest, the angels will conduct due diligence to learn more about your business and, if that diligence is successful, you are more likely to get funded.
Angels are usually more than simply investors. If they invest, they will often take an active role helping you to grow the business. You should remember that angels generally fund only about 1 out of between 20 and 50 deals.