CHAPTER SEVEN: Part E – Your dream of raising money from an angel investor is gradually coming true. You have contacted the angel, and you have both agreed on the date and venue of the first meeting. This first meeting may either double as the last or be the first of several meetings between you two; it all depends on how well you present your business concept.
Now how do you ensure that your pitch would be a turn on, so that you would close the deal right away and leave the meeting with a check in hand? Many factors will guarantee your success. Example of such factors are your level of preparation, confidence, accuracy, knowledge of your concept, conduct and so on.
First, you should have carefully rehearsed brilliant answers to all the questions you may be asked during the meeting. And you must be armed with your business plan; which clearly defines your marketing strategy, financial analysis, and other core areas angels are particularly interested in.
Another thing you should have taken your time to prepare ahead of the meeting is your pitch. This could be in PowerPoint (electronic) format or in print. Even if the investor doesn’t arrange a projector, try to take one along to the venue of the meeting if you think a projected presentation is the best way to sell your idea. And whenever you will be presenting your pitch using a projector, have a backup plan by printing out copies of your slide in case something fails.
What does a typical investor pitch look like?
Whether it’s in electronic or short book form, your pitch must be short (it should be no more than 15 slides/pages long). Having additional slides doesn’t enhance your investor pitch, neither does it boost your chances. Here’s what the outline of a typical pitch should look like:
How to Pitch Angel Investors – Sample Business Plan Presentation Format
Slide 1: Introduction
Describe yourself and your proposed business in as few words as possible. Be clear in your communication. No matter how complicated a business is, there will always be a way to describe it in simple, nonprofessional terms by answering three basic questions:
- Who is the business serving?
- Will the business offer a product or a service?
- Will the business save your customers time, money, headaches, or a combination of the three?
Slide 2: The problem
What problems are your potential customers facing? Though your business idea may be aimed at solving a larger societal problem, you must bear in mind that the society will not pay to solve its problems (each individual will). So, focus on the pain points of the individual paying customer.
Slide 3: The market or opportunity
- How big is the problem?
- What is the size of your target market?
- Explain any trends that are driving or will drive the growth of your market
Slide 4: The solution
- How will your business solve the problem?
- How do you plan to make money by solving the problem?
Note: This is one of the most important slides to the investor, so make it brief, but impactful. If your business model is somewhat complicated, you can break this into two slides:
- The solution
- The business model.
- Who is already solving the problem?
- In what areas are they doing very well?
- In what areas are they performing badly?
- Is the competition direct or indirect?
Why is your product or service better than the competition? (Communicate this in a way that clearly explains why your product or service is better suited to solve the problems of your customers. If necessary, render this explanation on competitive advantage on a separate slide).
Slide 6: Sustainable competitive advantage
- Do you have any unique and defendable intellectual property?
- What patents have been filed?
- Why are there entry barriers to your business?
Slide 7: Marketing strategy
- Are you selling directly to consumers or to other businesses?
- Do you have any sales or marketing partners?
- Will your company manufacture/distribute the product, or will you work with partners?
Slide 8: Traction
- Is your product complete?
- Do you have any contracts or proofs of interest from potential customers?
Slide 9: The team
Give a brief bio of each member of your team and, for each, explain their current role, why they are qualified to handle the role, and their experience.
- Are there any missing members that will need to come in later?
- Do you have an advisory board? If Yes? Who is on it?
Slide 10: Financial projections
Add a basic chart showing your 5-year projections for revenue, gross margin, headcount, and unit sales.
Slide 11: Funding and offering
- How much money has been raised or invested to date?
- How much money are you, the founder, investing?
- How much capital do you need to raise in total?
- Have you determined your company’s valuation?
Briefly explain the terms of this investment deal
Slide 12: Exit strategy
- How do you plan to deliver a ROI?
- What are some potential exit scenarios?
- Do you plan to sell the company, or your license or technology?
- What types of companies are likely to purchase your business or license?
- Are there any similar acquisitions in your industry in the past 3 years?
- What was the sale price for each of those acquisitions?
Slide 13: Conclusion
- Briefly recap why your business opportunity is a promising one.
- Include your contact information.
If you are presenting your business idea in the form of a printed proposal rather than orally, then the outline given above still holds; but instead of slides, you have pages.
Winning the heart of an investor with your business idea requires more than a brilliant pitch and adequate preparations. Here are other things you must do before your meeting with an angel investor.
Nine Helpful Tips for Pitching Angel Investors Successfully
1. Dress appropriately and professionally. It’s always better to be overdressed than under-dressed. Business casual is the standard. Remember that most angel investors are from a generation that frowns at wearing faded jeans and T-shirts to business settings.
2. Speak for yourself. Since you are the owner of your business idea and head of your team, you should be the one to do all the presentation. You are the one the investors want to see and hear. It’s your attitude, character, passion, confidence, and expertise that they want to judge; not those of someone else. So, a team presentation shouldn’t be your plan; let it be a one man show.
3. Respect the time limit. If you are given a time limit, you must try as much as possible to obey, even if that means you will have to ditch some of the things you have planned to say (don’t ditch important details, though). When you go over the given time limit, you create one or all of three impressions:
- That you think your time is more important than that of the investor or other members of the audience
- That you are unable to follow simple directions
- That you did not prepare well, so as to be able to nail the presentation within the given time
4. Gauge your body language. Don’t get written off by an investor even before you go too far with your presentation. You should be composed and you should make direct eye contact with the investor and others (if there are other people listening). A certain level of nervousness is normal, but if you constantly shift on your feet or fret for too long, you may send signals that you are not trustworthy.
5. Grab attention with your elevator pitch. You must emphasize the problem and your solution, as these are your hooks. Also emphasize your unique selling points and what you are offering to whom. But ensure that you reserve unnecessary details like how you came upon the idea for your autobiography.
6. Avoid errors in your pitch. Rid your pitch of typographical, grammatical, and spelling errors. And use clear and legible formatting.
7. Use facts, not generic adjectives. Generic marketing phrases like “more user friendly” and “huge opportunity” hardly convince anyone these days. Rather, use facts like, “According to Honeywell, the industry is presently worth $100million and is expected to reach $162million by 2016.” So, survey results, statistical findings, and product test results are what you need.
8. Be clear with your offer. Tell the investor how much money you need, and what percent of your company you are willing to give up for that amount. Present these as clearly as possible.
9. Close by asking for questions and promising follow up. Asking for questions, feedback, and suggestions for improvement will always lead to a positive impression. You should answer questions with data if you have it. Don’t forget to leave your promise to follow up after the meeting.
13+ Additional Do’s and Don’ts for Dealing with Angel Investors
- Before pitching an angel, let a few people you trust, such as your family members or close friends, go through your pitch and give you feedback on how to make it better.
- Don’t ever approach an angel investor without having written a comprehensive business plan
- If possible, show a sample of your product during the first meeting
- Always find out about the personality of an investor before meeting him or her. This may help you figure out how to impress them and whether they are someone you can deal with.
- Don’t let desperation push you into a trap. Only deal with angel investors that are understanding and willing to help you grow your business, not those who are obviously out to milk you dry.
- Set business goals and scopes that you can easily achieve and cover. If your goals are too big or sound unrealistic, you will discourage investors.
- Allay any fears raised by the investor (if you already have them well handled in your plan)
- Communicate frequently with investors. Send updates monthly or quarterly with details of how the business is faring.
- Demonstrate your commitment by putting in your best.
- Don’t let an angel investor dictate terms. Listen to their feedback, but don’t offer special status or authorize special shares. For the first few years, issue common shares only, not preferred shares.
- Don’t make sudden cash calls. If you would need additional money, work on it ahead of time. No angel wants to feel like they are helping to keep a sinking ship afloat.
- Don’t expect much help from the angel, aside from the cash; so that you won’t be disappointed if he doesn’t offer any.
- Don’t spend all your time managing your relationship with angel investors instead of focusing on your business. Angels can be distracting.
- Most importantly, you must make sure that your business idea or product prototype is legally protected via patents, trademarks or copyrights; before presenting it to investors. You can also cover your back by making the potential investors sign a non-disclosure form before hearing your pitch or seeing a demonstration of your product. A good corporate attorney can help you with these.
Is it a good idea for an angel investor to come on board as an adviser? The answer to this question depends on your how well you know the angel investor.
Investors who have funded many successful businesses similar to yours and have a vast wealth of experience in your industry would be instrumental to the growth and success of your business. So, you should have such as an adviser.
But if the investor is only interested in your business, but lacks knowledge and experience in your industry, getting professional and business advice from such may spoil your broth.