An angel investor is someone who invests in an early stage or startup company in exchange for an equity ownership interest. If you approach an angel for financing, these are the four main areas they will focus on when assessing you:
1. Vision and strategy
The No. 1 thing angel investors care about is vision. A potential portfolio company has to have a clear vision of how to succeed in its marketplace. This vision will help the company overcome the difficulties it will face as a startup.
Without a vision, a startup will not be successful in getting the attention of angel investors. Angel investors look for a leader who has a clear idea of what his or her company will mean to its clients or consumers, what challenges it will face, and a strategy crafted with both these points in mind.
A vague notion of how a product might succeed does not qualify as a vision. Visions must be clear, plausible, and disruptive to some current product or trend. In other words, it should be clear how the new product or service offered by the company will change the marketplace for the better, and why consumers or end-users of the product or service will find value in it.
2. Leadership experience
Angel investors look for leadership experience among the founders of the startup. Starting a successful business is an exercise in leadership and team building. For most angel investors, that is a skill that has to be in place in the startup’s team before they will consider making an investment.
Founders of startups will need to make the right hires to form a small talented team with good chemistry. The founders will then have to lead that team into executing the founder’s vision on a very high level. The resulting product or service will have to be a disruptive force in the current marketplace—thus, the team must be motivated and capable of taking on products supported by companies with much greater financial and human resources.
Without outstanding leadership skills, the new company will not be able to successfully execute its vision. This is why angel investors look to the founders of the company for demonstrated leadership skills.
These skills do not have to demonstrated in a traditional corporate environment, however, as most angel investors are open to other forms of leadership experience. The key for founders is to show that they have built a team and successfully executed a complex plan before.
3. Entrepreneurial experience
Another kind of key experience that angel investors look for in potential portfolio companies is entrepreneurial experience. Of course, starting a company is an inherently entrepreneurial experience, and angel investors look for evidence of entrepreneurial skills in the founders of companies they might invest in.
One big plus for angel investors is serial entrepreneurship: have the founders built a successful company from the ground before? Have they sold or IPO’d the company? Angel investors will be much more interested if the answer is yes. Even failed entrepreneurial experiences are considered a plus by many angel investors, provided the entrepreneur can explain what he or she learned from the failure.
Most angel investors will not invest in a company whose founders do not have any entrepreneurial experience. The entrepreneur should expect to show some success in building key aspects of the business before receiving angel funding.
4. Communication skills
Communication skills are key for any potential entrepreneur looking to receive an angel investment. The entrepreneur must be able to communicate his or her vision clearly, not just to angel investors, but also to team members, suppliers, potential clients or customers, and to the marketplace in general.
This is why angel investors focus on an entrepreneur’s communication skills; successful entrepreneurship requires great communication skills. An entrepreneur must be able to convince a skeptical public that this new product is better than the old way of doing things. An entrepreneur must be able to convince suppliers to work with the new company. The entrepreneur must be able to convince potential employees that the risk of working for a startup is worth it.
To persuade all of these stakeholders that the risk of associating with the new company is worth it, the entrepreneur must have outstanding communication skills. In particular, the entrepreneur must have great interpersonal communication skills, since most interactions between the entrepreneur and potential stakeholders in a new company are face to face or over the phone.
Good writing skills are also essential as an easy-to-understand and persuasive business plan is also a must for entrepreneurs seeking funding from angel investors.
RELATED: Angel Investing: 20 Things Entrepreneurs Should Know
The post 4 Things Angel Investors Care About appeared first on AllBusiness.com.
No comments:
Post a Comment