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The art of pitching to an angel Investor – and the science behind it!

Convinced as you are about the scalability of your business idea, the project has captivated your mind for too long now. Now – your instincts guide you – is the perfect time for its release. However, there is an element missing in your quest to create a highly successful business venture: adequate capital. It is then you do what most people do when faced by a challenge – you look to the angels.

But while you may be convinced that securing an angel investment is your ticket to a promising entrepreneurial journey, it is also essential to understand how these investments work and how to increase your chance of securing funding from angel investors. Let’s dive deep into the subject to offer you a firmer hold of the angel investment landscape.

Understanding your financial requirement

Develop a firm understanding of your start-up’s capital requirement. Comprehensively analyse and integrate the current business requirement with a long-term perspective, and try to understand the market demands precisely through data and quantifiable metrics instead of mere speculations. Also, if possible, first try alternative measures of raising funds. Bootstrap, take bank loans, raise money through interpersonal connections, and make use of government-led initiatives before you approach angel investors. Doing so underlines your commitment to your entrepreneurial vision and increases your chance of securing angel funding.

Inves(MEN)tor: Making a difference through investment

Always avoid dumb money, i.e., an investment in which an investor merely offers you financial assistance and doesn’t provide mentorship to your start-up. Also, avoid investors that do not have prior experience in your chosen market segment; they will neither be able to assist you in developing and scaling your venture, nor will they be in the capacity to help you out during a business complication. Your investors must also be in a position to give you ample face-time and business-related advice as and when requested.

What do angels look for?

Every investor is interested in the value proposition that your start-up has to offer. What is the unmet market requirement that you aim to solve? What market activity are you banking upon? How and what will it change? Unless investors see something happening very differently, it’s unlikely to get them interested in your start-up. However, every investor has his/her own basis of start-up evaluation.

Never follow me-tooism. A business is not scalable if it doesn’t have USPs serving as strong differentiators in the market. Aim for unique opportunities rather than entering a market that is already cluttered with predominant players. Investors also often trust the team more than they trust an individual entity, such as a founder or a management head. An incomplete team will inevitably diminish the chances for acquiring funds.

Finally, an entrepreneur must always be inquisitive – especially regarding the subjects directly related to the business dynamics. A very telling characteristic that investors look for within the entrepreneur at the seed stage is his/her innovativeness. The entrepreneur must also not hover around financial loopholes in the system or any other unscrupulous tactics. This can create a negative and unethical perception.

• Market

The main point of focus in your pitch is the market. Angel investors mostly look at the size of the market a prospective investee operates in. There should be a certain velocity within the market; an investment opportunity is more lucrative for an angel investor if the target market is undergoing rapid growth.

Always avoid a shrinking market. Also, avoid market verticals where players have already taken up pole positions or where there is no room for disruption. Heavily-funded sectors are generally given a pass by angel investors, who also distance themselves from businesses that require constant injection of funds.

• Execution

An entrepreneur must elaborately plan the business execution before pitching to an investor. From recruitment to capturing the market, business expansion to launching new products, you must formulate an elaborate strategy for your business for a minimum of 3 years. Focus on appropriately positioning the brand rather than burdening the start-up with unnecessary burn rate. Your start-up should be able to enter the market with a commanding position. In this context, execution plays a vital role. Work on it.

• Equity and Funds

As a rule of thumb, for an amount lower than INR 2 crore, the equity is in the region of 15-20%. The equity for an investment of INR 2-5 crore is anywhere between 20-35%. Nothing goes beyond 35% in seed investment. This is the most common scenario.

Avoid overfunding as well as underfunding of your start-up. You must debate and brainstorm with the investor to ensure that the amount is just adequate. A start-up must ideally be able to sustain for 18-24 months from revenue injection. Furthermore, you would possibly have to agree on an equity amount which is not comfortable, but you can always ask your existing or incoming investor for a claw-back at a later stage if the venture has performed exceptionally well.

The Art of Pitching

Understand that you yourself are the message, not the PowerPoint presentation. This must clearly resonate in your pitch. Your enthusiasm must rub off on the investors. The idea should also be presented in a concise and effective format, such as elevator pitching.

Gauge the investor’s reaction during your pitch. Answer to them immediately in case of a query. Do not make them wait, and do not make busy presentations. The presentation must be accessible from the investor’s mobile phone. A busy presentation with too many animations and graphics will decrease the likelihood of generating the investor’s interest. You can also send the PDF of your pitch to the investor, and use the email body to highlight two or three of the most important slides. Make a conscious effort to not explain the technical details to the investor. Rather, focus on the product’s usefulness in the market. Make the pitch as simplistic as possible.

Applying the above mentioned points in your business pitch to an angel investor can significantly increase your chances of securing a deal. Winning over investors with your business vision can put you well on your way to a promising, exciting entrepreneurial future.

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A doyenne in the field of early stage investment and start-up incubation, Dr. Apoorv Ranjan Sharma is the Co-Founder of Venture Catalysts, India’s first Seed Investment & Innovation platform. In his role, he is responsible for driving the strategic planning and overseeing the overall functioning of the organisation. Dr. Apoorv holds an Electrical Engineering degree from Harcourt Butler Technological Institute, Kanpur, and an MBA from Asia Pacific Institute of Management, New Delhi along with a Diploma in Mentoring Start-ups from University of California, Berkeley. He also holds a PhD in Management, Role of Business Incubators in Economic Growth of India, and is one of the very few professionals with academic certification in Incubation and Early Stage Investment currently active in the start-up field. Having been involved in early stage investment since 2002, Dr. Apoorv has a series of professional accomplishments to his name. He was the Project Manager of the JSS Technology Incubator/JSS SEED Fund, which was the first Government-sponsored SEED Fund in India. He then took over the task of establishing Amity Innovation Incubator and was responsible for developing its Amity Family Office Fund as its General Manager. Dr. Apoorv has also led the Indian Angel Network (IAN), India’s first and largest angel network at present, as the Vice President of its Western Region Investments and Technology Incubator. He has also been involved as the Executive Vice President of VentureNursery, a start-up accelerator. Venture Catalysts, his latest venture, distils his years of experience and proficiency with various fundamental start-up related concerns into a unique, integrated platform providing solutions to all early stage start-up requirements. Having been associated with the Indian start-up industry since it came into being, Dr. Apoorv has gained vital insights and practical, in-depth understanding of the Indian start-up ecosystem. He has led several investment drives into becoming thriving ventures, and has a portfolio including more than 10 companies with more than 100 crore valuation. Moreover, in his capacity as a start-up mentor, he has also guided several investee companies into securing angel as well as VC funding. Dr. Apoorv has, over his career, fostered several close connections within the start-up industry, which he leverages in order to facilitate growth and add value for all key stakeholders in an investee venture. His aim is to lead Venture Catalysts as the foremost single-point start-up solutions platform by revitalising and revolutionising the early stage investment industry backed by his strong industry connections and sourcing capability. Dr. Apoorv is planning to onboard seasoned angels as well as HNIs onto the VCats platform, and will be looking to raise INR 100 crore from multiple investors to drive 15-20 annual early stage investments.

Stories by Apoorv Ranjan Sharma