Applicants who successfully obtain angel funding typically demonstrate certain key traits. Preparation and timing are key. Ventures who have evidence and traction to support the following are able to garner the attention of investors. Overwhelming uncertainty often causes investors to ask for updates and hold off on writing checks until the company shreds some layers of risk. Visit the entrepreneur guide to see inexpensive strategies to increase your venture's credibility and probability of raising funding.
Prepare your investor pitch deck (Challenge yourself to answer all of the questions on slide 32)
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+ STRONG MANAGEMENT TEAM
An ideal management team has relevant experience and domain expertise. They understand industry dynamics, are coachable, and are fully committed to the business. Teams should have a focused plan and should be able to demonstrate that they have the ability to execute. Management teams should utilize pro forma financial statements to set realistic goals and benchmarks, and they display a history of achieving projections and obtaining critical milestones. Investors like to see that teams are realistic about their company’s critical risks and valuation. If the team is incomplete, it should recognize who is needed to complement their knowledge, skills, and abilities.
+ NICHE DOMINANCE
Teams should be able to convincingly explain their plan to achieve a sizable market share in a well-defined niche. They should demonstrate a realistic vision of their market and a cost-effective sales strategy to scale the business.
+ HIGH GROWTH POTENTIAL
Businesses should have a large addressable market and a credible strategy for achieving growth including supporting data. Teams should understand their competitive landscape and barriers to entry. A strong supply chain is also required in order to cultivate a high growth business.
+ SUSTAINABLE COMPETITIVE ADVANTAGES
Ventures should demonstrate that they are unique and superior as compared to competitors – often by replacing or improving current offerings. The team should understand how to articulate their benefits and advantages to customers. The company’s competitive advantage must be sustainable. Examples: a “blocking patent” (keeps out competition); a vanity number (1-800-WEDDING); a domain name (buy.com); “first-to-scale” advantage (can show they already are the first company to achieve some scale in a new niche).
+ EXCEPTIONAL RETURN ON INVESTMENT
The capital required should be in line with the potential for success and the reward for investors. Teams should be realistic about their company’s valuation and should understand potential exit strategies. Because angel investors assume a great deal of risk by investing in early stage companies, applicants should be able to make a compelling case for a 10x or better return on investment within 5 years. Ideal businesses lack capital structure issues and skeleton problems. The company should be able to demonstrate that they have favorable timing and have the ability to make money.
+ USE OF FUNDS
The team should have a focused plan to maximize the investment’s impact on efficient growth. The mentoring, networking, and capital sought should propel the company to a critical inflection point and should materially increase its valuation.
+ TECHNOLOGY THAT SOLVES PRESSING NEEDS
Regardless of industry, teams must demonstrate market validation, ideally by earning revenue and identifying a strong sales pipeline. The company’s target customers’ adoption rate and feedback should be favorable. Teams should be realistic about their business concept and should have a plan to efficiently maximize growth.