Moving to the next phase after the successful launch of your startup is often where some new entrepreneurs bite the dust. It is common for most startups to source for investors for them to get to the next level.
An angel investor could play a viable role in your investment strategy. Angel investors are the solid choice in funding your startup, especially when you are just starting. They offer more favorable terms than other lenders. Unlike venture capitalists, angel investors concentrate on helping your startup take its first steps rather than the possible profit they will make from this venture.
It’s not a walk in the park to attract the attention of angel investors. They clearly understand that startups have a high risk of failure. However, understanding what angel investors want to know before investing in your startup will get you on a good side with them.
We can confidently assure you that disseminating your startup idea to a flock of angels hoping one will pitch in and give you the funding may not be the best strategy. The best option is to understand who these people are, why, and how they invest. Then, you can approach the best match for your particular startup stage, location, and industry.
Here are vital insights angel investors analyze before pitching in your startup.
What Angel Investors Want to Know Before Investing in Your Startup
1. The Team and Founder Initiating The Startup
Most angels consider the team behind a startup and its leadership ability ahead of the startup’s idea. They want to know you are passionate and believe in the product/services you will provide.
Having the right set of skills, drive, experience, and a solid team to grow a business will attract angel investors. They will want to know what motivates the founders, has your team worked together before, and what makes your group special to execute the startup business plan.
In the long run, angels want a founder and a team they can work with smoothly. A well-rounded management team is what angel investors want.
2. The Scope Of The Market Opportunity
Angel investors are looking for a business opportunity with growth potential. You have to demonstrate upfront why and how your startup has the potential to cover a large enough market.
Present big ideas. Prove to angels that you can incorporate the economies of scale into your startup.
Angel investors will want to know your target market and the potential market you can attract over time.
3. What Are The Potential Risks To The Startup?
There is an inevitable risk for any business plan. Angel investors want to acknowledge these risks and the precautions you can meet to alleviate them.
Consider some of the following queries seed investors will likely want to know:
- The principal risk to your startup.
- The technological risk involved.
- Your market risks.
- Are there any product liability risks?
- What are your regulatory risks?
- A breakthrough to mitigate these risks.
It’s also crucial for angels to know that you are willing to take counsel from others to mitigate risks.
4. What Makes Your Startup’s Product / Service Great?
This is usually a critical issue for angel investors. You have to elaborate on what product/service you will be bringing to the market. And how does it differ from existing brands if it’s not a new entrant?
Be ready to answer about your major product milestones. Angel investors will want to know why users value your product, the customer reviews, and some of the features you are willing to add to improve this quality.
There has to be something about what your startup offers that sets it apart. Also, what gives your brand a competitive advantage over your competitors?
5. The Positive Early Traction Your Startup Has Already Attained
A startup that has already demonstrated its ability to sell the product/service will attract private investors. Having a proof of concept to show your investor will push them in giving your startup the funding it needs.
In addition to this, angels will want to know why this traction, accelerate it and find working ways to scale it. It’s important to highlight some of the buzzes, such as publications and press reviews your startup has already garnered.
6. Overall Financial Projections
Although angel investors may differ from venture capitalists, still every investor likes to seem believable and interesting financial projections.
Small numbers may not attract angel investors. They want a startup that possesses the ability to grow significantly to a large enterprise. On the other hand, if you show projections that exceed your startup’s limit, especially having generated zero revenues at the moment, investors will take you as a joker.
Angel investors have to believe your financial projections. You must be able to justify your key assumptions that make the projections reasonable.
7. An Exit Strategy
Angel investors expect a range of exit strategies for their investment. To top it up, you have to analyze each strategy’s risk and find ways to handle it when it is finally time for the angel investors to exit.
To sum it up, it may take time for you to find the perfect angel investor who will invest the right amount of money with favorable terms. Feel confident and blend professionalism with deep dedication in your startup. Recognizing what angel investors want to know before investing in your startup will get your venture off the ground to the next big stage.