business will carry the most weight in the decision of angels
to invest. Here are the major questions that angels ask.
• Does the entrepreneur inspire confidence? Angels place
considerable weight on the quality of the entrepreneur.
A business is run by people and if the people are wrong,
the business will fail. Entrepreneurs must convince angels
that they have both an entrepreneurial capability
and a team with sound management skills. These entrepreneurs
must also have a good educational background
and a track record of performance in the
business line of their choice. They must have great enthusiasm
or passion for the business they are starting.
The entrepreneur must put together a solid manage-
ment team to give confidence that the various business
activities can be run well.
• What is the funding to be used for? Given that angels
tend to fund early-stage ventures, they strongly prefer
that their investment goes directly into the company
being capitalized. Although there are exceptions to
this rule, investors normally exit after the angel stage
of finance.
• Does the venture fit with the angel’s own investment
profile? This is why it is so important for capital-seeking
entrepreneurs to target their pitches. There is little point
in going after angels who don’t invest in the venture’s industry
or whose risk profiles don’t match the business.
Prior to approaching angel investors, entrepreneurs
should first understand their particular characteristics.
What factors motivate the angels to invest, and what industrial
sectors are attractive to them? They must be
able to show how their business opportunity matches
the angels’ goals.
• Does the business have genuine growth potential? Entrepreneurs
need to show that the business can take off.
The business must have some unique characteristics that
are likely to win customers against competition in the
chosen market niche. Is the venture doing something
unique, and if so, is that something not easy for potential
competitors to copy? Is the market big enough to
make growth and cash flow projections possible?
Also, most angels are wary of single-product businesses.
They like focus, but can the business develop multiple
income flows? This is not to say that single-product
companies are unworthy of investment, but when revenue
streams are dependent on one product, potential investors
get nervous.
• Is there a credible business plan? Most angels want to see
a business plan before investing. A good plan will discuss
the vision and mission of the company, and will also show
financial projections, a marketing plan, a sales plan, and
an outline of major operating controls. At this stage, the
plan should be short, concise, and to the point. It should
summarize the products to be sold, the credentials of the
management team, the financing sought and the reasons
for seeking capital, any achievements of the venture to
date, expected milestones, and exit strategies.
Read More : What Angels Investors Are Looking For?
