Angel investors are all the rage, highly sought after and decidedly picky. Here are five ways to attract, and keep, their attention.
Every startup business in the United States wants money. While that’s not exactly news, it means that the investors you so desperately want to invest in your incredible, one-of-a-kind-got-to-see-it-to-believe-it business are a finicky lot. They do not intend to be walking ATMs spitting out cash advances to every small business owner who passes by.
Even though you’re well-researched, well-rehearsed and generally prepared to pitch investors, it doesn’t hurt to have an insider’s advice to help you make the best case possible. That’s where Brian S. Cohen can help. Cohen is the chairman of New York Angel, a group he calls the largest, most active angel group in the U.S. Leveraging his experience, Cohen co-authored a book called “What Every Angel Investor Wants You to Know.”
In an article on Small Business Computing, Cohen shared several tips that can help budding entrepreneurs secure the angel funding they need to get their dream off the ground.
Connect with Investors
Many entrepreneurs overlook the emotional aspect of raising money. Yes, you’re asking for money and you need to know your facts and numbers cold, but you’re also building a relationship. Don’t be afraid to show potential investors your passion for your business. It can help them believe in your company—and in you. As Cohen puts it, “you’re investor-raising, not money-raising.”
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Understand Your Customer
When you understand what your customers and potential customers need, you can give it to them—often even before they know they need it. “I see a lot of companies in search of problems,” says Cohen. Provide solutions instead. You’ll avoid a lackluster reception from investors if you’ve looked at your products and services from your customers’ vantage point. Cohen suggests asking yourself, “Is the customer deeply interested in this?”
Study Customer Behavior
According to Cohen, it doesn’t matter whether you’re selling to consumers or to other businesses. “Everything about business is behavior,” he says. Look for something that your customers do, in many cases, through something in the way they work and play online.
Then ask yourself: does your product or service enhance or enrich these behaviors? If what you offer doesn’t provide a compelling reason for customers to adopt it, angel investors will be hesitant to fund your business.
Does Your Team Deliver?
Your new company’s leadership matters when it comes to raising money, but “it’s all about the team,” says Cohen. Angel investors want to know that there’s a team in place that can drive the business forward. What is a successful business if not a solid team effort? Fill all of your critical positions with qualified people that complement one another.
Does Your Team Execute?
This isn’t about 100 percent success or never making a mistake. Your business success depends on your company’s ability to change and adapt to market shifts.
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Angel investors don’t mind a bit of swagger and attitude, but they generally won’t back companies that stick to their guns and ignore the warning signs that the market’s evolving. Cohen says investors want to know: “Can you quickly change as you learn more about the marketplace? Can you iterate quickly?”
Lauren Simonds is the managing editor of Small Business Computing. Follow Lauren on Twitter.