How to Make It Into “Startup Heaven”

IMPRESS THE

ANGELS

WHAT IS AN ANGEL INVESTOR?

A high net worth individual who invests their own money into startup companies in the hopes of gaining a return on their money.

Many angels are entrepreneurs themselves, or executives and business or community leaders.

Wikipedia defines an angel investor as:

“an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.”

HOW DO

ANGELS

INVEST?

Angel investors can invest individually, or as part of an angel investor group.

The type of deals and industries they invest in, company stages, as well as

what amounts they invest, depends on the individual or angel group.

Angels come in all shapes and sizes—from newbies to

seasoned investors—and they invest anywhere from very

small increments of $5000 up to much larger amounts, like $1-2 million dollars per deal.

$5,000

$2,000,000

If you’re lucky, and a angel (investor or group) is piqued by your initial short pitch, they will want to schedule more time with you getting to know you, your team, and dig deeper into your business plan.

Source: Tech Cocktail: http://tech.co/angel-investing-series-part-ii-2011-08

THE DUE DILIGENCE PROCESS:

Business plan review

Management presentation

Site visit(s)

References

Competitive analysis

Financial analysis

The Deal

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Source: Tech Cocktail: http://tech.co/angel-investing-series-part-ii-2011-08

THE DUE DILIGENCE CHECKLIST:

Due Diligence Checklist Table

Best Practice Guide

Source: Angel Capital Education Foundation

CLICK HERECLICK HERE

ANGEL INVESTORS

VENTURE CAPITALISTS

VS.

“Angels generally invest their own money in start-ups and very early stage companies,

while Venture Capitalists mostly provide capital they have raised from others to later-stage

businesses for growth.”

— Angel Capital Association

Depending on the venture capitalists, they may want to own the majority of your company (i.e. 51%).

This will definitely change the dynamic of your company, so it’s important to conduct thorough due diligence on any investors who are interested in investing capital into your company.

Always look at the portfolio of investments the firm has made, and contact the CEOs and Founders of those companies to find out what it’s like having them part of their company.

Ask them—point blank—would they take their money if they could do it all over again?

And what have been the pros and cons of taking venture capital?

WHAT IMPRESSES ANGEL INVESTORS?

LET’S ASK THEM…

“I am impressed when the entrepreneur talks to me about solving a specific customer’s problem. If he/she really knows what the customer wants and is

willing to pay for, I sit up and take notice.”

— Dan Whitaker Angel from Corvallis, OR

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“Entrepreneurs impress me most with a professional, but also kind/down-to-earth presentation. I must believe that they believe in their own product. They absolutely must be persistent. Angels get a ton

of emails and the way they stand out is through relentless follow-ups ('Oh here's this Pete guy again' vs. 'who are you again?'). Correct

spelling and punctuation doesn't hurt, either.”

— Candice Yoneyama Angel from Los Angeles, CA

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“I'm impressed when entrepreneurs know their numbers inside and out and are realistic about their valuations. I also am attracted to companies who can tell me how they'll be successful if they never

get the next round of funding.”

— Jessica Magoch Angel from Philadelphia, PA

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“For me it comes down to ‘Intrapersonal Communication.’ Every start-up has a great idea usually born by a "visionary" that's going to create wealth.

What follows next are projections and marketing plans—every start-up has them of course. So what's going to separate "YOU" from all the rest?

I'm swayed by people who can communicate and demonstrate to me why I should share their passion and motivation to get involved. As the start-up you're selling yourself, your company and your vision - and you have to

communicate to angel investors that you've got the ideas, the strategy, the team and the ability to deliver what it would mean to become involved.”

— Don DeZarn Angel from Eugene, OR

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“I'm an angel investor by day, comedian by night. One of the things I look for when investing (in addition to the obvious question of can it make money) is a sense of financial responsibility from the founders.

There's a tendency when using other people's money to fritter it away. !

For example, you may recall that the founder of GoDaddy spent $90 on a conference table, and he said it works just as well as a $10,000

conference table. I like to see a sense of responsibility when it comes to the environment, which dovetails with the idea of spending less money.”

— Dan Nainan Angel from New York City, NY

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“Too many founders tread the fine line between arrogance and ignorance. Their pitch style, in trying to be confident, comes off as

arrogant in saying they can beat the odds of failure at the pre-angel level, and they can beat competition often far ahead of them.

Ignorance emerges when it’s often clear they haven’t really researched competition, especially when I hear the deadliest and

dumbest statement: ‘No one is doing what we’re doing.’”

— Kim Garretson Angel from Edina, MN

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“Entrepreneurs impress me when they demonstrate a proven revenue stream before asking for capital. This shows they have

made a realistic assessment of the total addressable market (TAM) they can capture. They should also show that they have measured

the cost of reaching that market by comparing a customer's lifetime value (LTV) to the customer's acquisition cost (CAC).”

— Anthony Alfidi Angel from San Francisco, CA

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“Keep your strategy, tactics, numbers, and stories in alignment. Use a bare-bones streamlined business plan as the storyboard and make sure the summary memo, pitch deck, and main stories all match. It seems obvious but I see more than 100 pitches/plans every year, and at least half of them turn around and

eat their tails at some point.

Be a line, not a dot. Keep up with investors and show them progress over time. Nothing adds credibility like milestones met.

Don't promise traction; demonstrate it.”

— Tim Berry Angel from Eugene, OR

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“I love to hear brutal honesty no matter what, and a plus if it is tied to past experiences, even childhood, that makes integrity and

transparency a top priority. Also don’t have an answer for everything.

If you get an obscure or surprise question no one would logically know as a fact, ask the question back ‘I'm not sure, what do you think?’ This

will indicate what decisions will be like once in business together.”

— Dan Fugardi Angel from Beverly Hills, CA

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