10 Ways to Secure Business Startup Funding from Angel Investors
The world is moving fast in terms of tech each day, be it products or services, and everyone is seeking investment from the wealthy angel investors. In today’s world, only one thing sells, and that’s promising revolutionary tech. Both trillion dollar firms right now in the world have tech as their major business, in fact, most of the top valuation companies these days are, you guessed it, tech companies.
Most people don’t have the capital for kick-starting their tech business, that’s where the angel investors come into play. In the usual scenario, the investors take about 10–20% stake in the company. But the problem is, everyone has an idea, and the investors are looking for something more.
So, here are 10 tips for securing funding for your tech startups from angel investors:
1. Know your expertise
Most angel investors are those who have built their wealth from the ground up, they are fellow entrepreneurs and adore the fact that you want to be one too. From their own experience, the first thing they will judge you on is how deep knowledge do you have about your project.
Although it is mandatory to have knowledge about everything your project involves, we suggest you research in whole, about the secondary factors too. Things aren’t black and white when it comes to investors, they are more keen on the grey, keep this in mind the next time you pitch your idea to an angel investor.
These points will help you get a top spot in the eyes of the investor, but won’t actually be the only deciding factor. There are a lot more things to a great idea pitch, but maintaining composure and doing full research is the first step to win it. Everyone needs funding to kick-start their project and every investor understands that.
2. Pitch perfect
Pitching the idea is going to be the most important deciding factor if you get the funding or not. Essentially, the way you pitch your idea also decides the negotiation of the company share. Outsourcing isn’t a bad idea either, it just adds up to your portfolio and eases up on the risk part, so if you are developing a mobile App, you should find a top mobile app development company to do the development part.
It also matters if you have worked hard on your part. An idea is supposedly your dream project, and for an investor, you come to them when you need money. Keep in mind that everything in your project doesn’t require funds, some require your effort and hard work, and the investor knows it well.
So, work all you can, pitch-perfect, and see the magic work like a charm. All investors have been in the industry more than you, and obviously, they know more than you. There isn’t a competition between you and them, they just want to ensure you work hard and have the zeal to work harder.
3. Assemble a great team
It’s a necessity to have skilled and presentable people in your core team, that’s because a good investor will always look forward to meeting them. Might be, the investor would decide upon the investment terms looking at the potential of the team you have assembled for the project. Also, know that most investors love products, rather than services.
The world is moving towards the subscription economy, and the dynamics for services and products vary a lot. Your team must have some good speakers, even 50% of them would do. But ensure that your core team has people that can pitch, and have clarity just like you for the project.
As an entrepreneur, the fact that you get an investment is critical, and having a perfect team is now a day a necessity. It may cross your mind, where would the funds come from to hire such people. But it is a primary goal, and even if your employees demand a stake, go for it if they are worthy. Think about it as an investment to grow higher and further, and set building up a perfect team as the first milestone.
4. Remember what you came for
More than any other things, it’s about the actual idea an investor would be investing in. It needs to have a rock-solid approach to crack the market open, and you don’t even need to be a visionary for one. Any groundbreaking idea would be trusted and believed in by potential investors, that’s why they are here. All angel investors are looking for ideas that move people and work in the actual world, rather than some flimsy sci-fi ideas.
You want your dream project, work for it, investors will weigh in the overall potential of your idea rather than the current market requirements. If you are a futurist, that’s great, you will find people believing in your vision even if the idea is 10 years further than our time. But don’t go too far, the risk multiples when it comes to products that won’t work in the near future. Everyone wants profits, and that’s a fact to remain forever, and everyone wants it as soon as possible.
Make a plan which involves an ROI of not more than 5 years ahead in time, your chances to land investment would significantly decrease for a product that would take greater than 5 years to come to life. Tech is changing at a revolutionary rate, and we can’t predict things which may be invented tomorrow. Always remember what made you choose the project you are pitching for, it will always help you in your journey ahead.
5. Stay humble
You may have the idea of the century, but you are probably delusional if you think so. Boasting of irrelevant things will only drop your reputation in the community, and always remember it’s a packed one. Be prepared and take it easy, and never compromise on research and extensive market analysis before stepping in.
It’s good to have a knowledge of everything, but getting arrogant may not be a really good idea. Know that if there are a lot more investors, there are a lot more investments like yours. “Ironically, angel investors are humans too, so staying humble and polite could be a major thing for cracking the deal.”
6. Maintain transparency
If you are true to yourself, this wouldn’t be a problem. But sometimes in the tech startup business, you need to make far off speculations, and you usually have a choice to fake it. Now, it’s up to you which path you choose, it’s more like a risk analysis. But before you land upon a decision, realize that the angel investor you are eyeing must have seen 100 more projects like yours in their career. Fooling someone in believing things you don’t even believe in yourself, could have really bad consequences.
You can on the counterpart, make sure you let the angel know what your plans are, along with a risk analysis. Everyone knows success isn’t guaranteed, but the risk’s a notch above for angel investors. They realize that they may lose a lot of money if things go wrong, and you know you won’t be liable to pay back. But why not, on your part, give in your all to it, as at the end, it’s not anybody else’s dream, it’s yours.
Transparency is subjective, and the other party may feel a lot of different things about it. To keep a fail-safe, once you crack the deal, let the investor know all insights for the business. In a way, the investor is going to be a major partner for your company, and have the right to know all about it. Maintain transparency so they could help you with their experience, and suggest if you should make any amendments.
7. Get things moving on your own first
The further you are in your project, the higher the probability of getting a bigger and better investment. Every investor wants the project to actually work, if you already developed the app, you are many times more likely to land up an investment. Things which are into planning, and projects which already are in pilot or have generated a customer base, have a lot of difference in the investor’s eyes.
It also proves a point, that you are giving your all in for the project, even if you don’t reach a substantial milestone. Make sure you hire the right people, as discussed in point no. 3. A good team is a major factor which is going to affect how the angel investor feels about your project as a whole. If in case you haven’t got enough any investment on you, try getting smaller funding to get things moving, land a stage 1 investment, then stage 2, and so on. Investment isn’t just a necessity, it’s the smart way to grow your business to unimaginable heights.
8. Keep up to date
The difference between tech startups and non-tech startups is the fact that tech is changing and evolving each day. Also, tech startups are overcrowding the market, each day you will notice how new tech is coming in, and the people rushing to build products through it. So, it is essential that you keep yourself up to date with what’s up in the tech world.
Investors seek people who are up to date on tech and can handle tech themselves, as it is always an added bonus to have a coding partner in your team. If not you, make sure someone from your team has the coding skills, preferably the CTO, so that investors feel safe in the long term robustness of your tech product.
9. Don’t be too speculative
The idea sells, but you can not accurately predict when it will click with users and have a specific timeline. Don’t speculate the project potential to get in the way of bringing your idea to life. No matter how many people you decide would use your product, it’s usually less if your product doesn’t work. Or if it does, more users will be hooked to your product then you thought. You should be ready for both scenarios.
So speculating the scale of your product isn’t really a worthy thing to do, but the angel will ask for it. You can get a bit diplomatic while staying humble, and plan your development cycle according to people who might use the product. You need to scale resources though so that the rapid expansion could be accommodated.
10. Sell your inspiration
As we said above, the angel investor would probably be an entrepreneur too, just like you. If your inspiration resonates with their’s, you might have your investor right in front of you. Investors love visionaries, especially those with whom they can relate. Just keep all the above points in mind, and get started on selling your inspiration, along with your vision.
Inspiration is what differs you from thousands of other entrepreneurs pursuing the angels to invest in their product. Make sure you give them something extra, apart from just numbers and figures, show them the zeal and the inspiration for which, you thought you need to work on your project, no matter what.
A Good Entrepreneur knows how to sell a product to an investor, but a great one sells the idea and its capabilities. Getting investment is only the beginning of the startup journey, however its one of the most important one. So rest everything, just keep up with what makes you, YOU. And the investors should happily agree on investing, that too on your terms if you could use the above points as guidelines and convince them that you are sincere with your project.