Today I am going to explain to you the funding process that you can be expected to go through when Angel Investors are considering to invest in your company. These tips will help you up your chances of funding your business.
First three stages of a developing a company
In the first phase, the seed, of the development of a company, there needs to be prototype, or business model, of the business idea. This will help organize the business plan and help form a management team. It is also a good idea to put together a marketing concept.
The next phase a business will go through is the the start-up phase. This is when one takes the business plan that has been developed and presented to the investors. The market strategies should also be in acknowledged as well.
Next is the first/early-stage of a company’s development. This occurs when a new business has successfully launched and have test marketed their business plan. During this stage, the new owners would have also put together their management team. This team will work together to help take the business to the next level.
How an angel investor can help
During the first stage of a company when it is developing, almost all entrepreneurs will face new obstacles and problems that would be hard to deal with alone. This is why it is best to get advice from others whom are experienced to ensure the success of the business. Angel investors are the best for this advice. They are experienced and can help guide you through any troubles and questions.
Of course, finding an angel investor is not easy. It can be a difficult process, as well as fairly competitive. To increase the chances of getting funded by an angel investor, you can follow a list of steps, which I will now explain to you.
1. A large ROI
Angel investors invest in your business with the same motive you do when starting a business--to make money. The higher of risk per investment, the higher return they expect.
2. The investment motive
Since these investors are experienced in your industry, they want to help in any which way they can. They want to help you build a successful business just like they did, if not more. You will not only have to tell angel investors why they would want to invest in your company, but you also need like let them know why they would want to invest in you, the entrepreneur.
3. A strong pitch and strong business proposal
Practice, practice, practice. This will help you enure that your pitch will be strong. Along with the pitch, Angel investors like to see a detailed business plan. This business plan should include your business's competition, marketing plans, target market, any financial projections, and so on. The more detailed the better. Here, you can find a business plan generator. This makes the process of building a business plan much easier.
These two things, the pitch and business plan, will up the entrepreneurs chances of raising angel capital. Each angel investor is different, so it would be wise to do some research on who your will be pitching to, and tailor it to the best interest of the investor. You will most likely find that there are three types of angel investors on PitchStreet
- Angel investors concerned with economic gain- these investors are motivated by money, especially in the public's eye. Entrepreneurs who seek these types of angel investors should not only stress the purpose of their business idea(s) but also mention shareholder percentages and ROI in their pitch and business plans
- Hedonistic angel investors- these are risk takers, and they love the thrill from it. These are good for high risk businesses, so if you are seeking these investors, make sure you have a well prepared business plan. These investors are great in that they also put more time into helping the entrepreneur market their innovative ideas.
- Altruistic angel investors- these investors take pleasure in helping young companies thrive and enjoy promoting community development and job growth. Entrepreneurs who seek capital from these types of investors should perhaps stress the advantages of economic growth in communities and economically sound technologies.
4. A solid management team
Investors like to see a strong management team. They look for a group of confident, aggressive, people that are experienced and skilled in the business's industry. Everyone on the team should have a strong background that will ensure the investor that everyone knows what they are doing.
5. Proper business structure and organization
Every business that wants angel capital must must have a proper and organized business structure. Angel investors expect not only a percentage of the company, but part ownership of the business. For the exchange of providing the business with capital, these investors will help with company operations, managing, mentoring the staff, to name a few. And of course, a large return of investment.
6. A well-defined exit strategy
Before the capital is given to you, you and the investor create an agreement of how long the investment will go for, a time frame. This is the period of time the angel investor will stay active in the company. Once this phase is done, this is when the investor will exit, creating a need for an exit strategy.
As you can see, this is a lengthy process that must be completed if you wish to get funded, but is very crucial.
Stay tuned to learn more about the funding process from PitchStreet!