The opportunity for an entrepreneur to present to an angel investor group is an
honor, since the process of obtaining angel capital
is quite competitive. It is important to note that an entrepreneur is encouraged
to construct their pitch in a simple, yet effective manner. Too much or too little
detail can often lead to confused and uninterested listeners.
In addition, the verbal presentation should be repeatedly rehearsed, since each
review will greatly improve oneâs verbal and presentation skills. Repetitive practice
in front of an audience is important because of the constructive feedback from others.
The array of opinions and ideas from eager listeners is very valuable and should
encourage the entrepreneur to modify his/her pitch accordingly.
The most intimidating part of meeting with angel investors is answering their questions
in a well-devised and concise manner. While some entrepreneurs may accomplish this
with ease, others may simply experience anxiety, answering the presented questions
with hesitation and doubt. Every new business owner, who is seeking angel capital,
should properly prepare for the moment when they meet with angel investors to avoid
rejection. Here are some questions that the entrepreneur may encounter:
1. Tell us about yourself and your company.
The entrepreneur should give a brief introduction about him/herself, including credentials
and education, and other pertinent background information in their opening. A general
idea of the company should then be mentioned, followed by the company objectives,
as well as the different products and services offered.
2. Who are your major competitors, and what makes your products and services
unique?
Entrepreneurs should be prepared to mention any market opposition and how their
products and services will give the business the competitive edge. Since market
competition can be relentless, it is always a good idea to provide solid examples.
3. Who are your targeted customers, and how have they responded to your prototype?
Angel investors are always curious of demographical information, including the targeted
market and consumer base the new business will appeal to. By creating a prototype
of the business idea(s) and welcoming consumer response, the entrepreneur can further
refine his/her prototype according to customer feedback. It may take multiple revisions
before an actual product is mass produced; therefore, it will be wise for the entrepreneur
to recruit potential customers to support his/her sales and even use them as references
to encourage their deal with angel investors.
4. What is your marketing strategy for your products and services?
This includes an entrepreneurâs approach in promoting the business through advertisements,
internet marketing and promotions, and public relations to increase sales and achieve
a competitive advantage. Marketing can be quite costly, so it is extremely important
for the entrepreneur to include this estimated price in the financial plan.
5. How much angel capital are you seeking, and how will this investment amount
be distributed?
It is always a good idea for entrepreneurs to provide an estimate of the amount
of angel capital they are seeking for their startup. By presenting the angel investor
group with financial outlines and predictions, the entrepreneur will gain credibility
in conducting their own due diligence (financial research) for their company. More
impressive is the rough draft or summary of how the angel investor capital will
be dispersed (i.e. rent, utilities, technologies, salaries, etc.)
6. What time frame do you expect the invested money to last?
This basically refers to the hypothetical period of time it may take for the anticipated
cash flow to appear. This is also the calculated schedule of time that is considered
to be the âsafe periodâ before additional capital may be needed. Typically, it will
take an average of one year or more for any new business to see revenue; therefore,
it is important for the entrepreneur to consider all possible expenses before determining
this amount.
7. What is my stake in the company and my ROI?
Since every prospective angel investor wants to have an idea of their percentage
stake in a company, as well as their rate of return, it is crucial that this figure
be presented and negotiated. Often times, angel investors expect a certain percentage
of ownership in a company with a large return on investment because of the risk
associated with the fate of new businesses. The entrepreneur should be aware of
such demands and be prepared to present such values.
8. What will happen next if the company fails?
Angel investors are known for their risky business deals and often have a well-planned
exit strategy for each of their investments. There is always the possibility their
invested company may not be as successful as anticipated; therefore, they usually
prepare a strategic plan in their agreement. They may choose to exit the company
after a certain period of time through IPO, merger, acquisition, or sell-out. The
entrepreneur can even offer their angel investor some protection by providing a
secured position on assets and subordinating the equity in case future liquidation
occurs.
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