If you’re considering seeking funding to either launch or grow your business, angel investors are one potential source of financing worth considering. But realize: angel investors get pitched every day, and turn down 90 percent of the startups that approach them. What can you do to put yourself in the best light possible to increase your chances of getting funded?
How to Get Angel Investors
Tip 1: Know Your Numbers
If you’ve ever watched Shark Tank and seen startup founders who fumble when asked what their profit margin or sales numbers are, you have witnessed how not being savvy about business finances can ruin a company’s chance of getting funded.
Even if you’re not a financial expert, as a business owner — especially one seeking money — it is absolutely essential that you know details on the following:
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Profit margin
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Sales (in dollars) over past year
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Gross profit
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Expenses
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Balance sheet
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Income statement
Before your pitch, spend time reviewing these documents so that when you’re asked about them, you don’t trip over the answers and can confidently give a response.
Tip 2: Have a Track Record of Success
If you’re struggling to keep your business afloat, this is not the time to seek funding. Investors are concerned with what’s in it for them: if they give you money, how will it help them make more? They’re not interested in bailing you out when times are tough.
Many investors won’t give money to a company that hasn’t yet launched. There’s no empirical evidence that your business will succeed if it doesn’t yet have a history of sales. But if you’ve been in business a while and have done relatively well, this is the best position to be in to ask for money. Yes, it’s counterintuitive to ask for money when you don’t really need it, but consider what you can do with an infusion of cash as you grow your business. You could expand into additional product lines, hire more staff or beef up your marketing.
Tip 3: Only Pitch Angel Investors in Your Industry
You wouldn’t ask your child’s pediatrician to give you a root canal, so why would you ask an investor specializing in another industry to partner with you? An angel investor typically has deep experience in (and may have even run businesses in) a particular industry. Not only do you want someone who understands where you’re coming from, but you also want a partner who has contacts in that field that can help your business grow.
Tip 4: Have a Plan
It’s essential that you have more than just a good idea when seeking funding. Sure, you may think your electronic backscratcher is going to take the world by storm, but rest assured, an investor who has decades of experience in bringing new products to market may not agree. If you are just starting out, make sure you’ve already done plenty of research and development, explored your target market and know enough to intelligently forecast the success of your future business.
Also, be keenly aware of the competition. An investor won’t be interested in your product if it’s a copycat of what’s already out there. You need a unique angle to ensure that not only an investor sees promise in your product, but also that customers will want to buy it.
Tip 5: Show You’re Willing to Help Yourself
Asking for an investment shouldn’t be a lifeline to success. Investors want to see that you’re doing everything in your power to promote your business, grow your network and increase sales. That’s your job, not theirs. If you show that, for example, your company has won awards or gotten media coverage, it might be enticing enough to spur an investor to want to be a part of that momentum.
Working with angel investors can provide heaven-sent funds just when you need them to grow your business. But remember, you want to be as attractive an investment as possible in order to not only attract one investor, but even have a bevvy to choose from.
Republished by permission. Original here.
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This article, "5 Tips for Attracting Angel Investors" was first published on Small Business Trends
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