How and when to approach an angel investor
As the needs of startups change and funding options evolve, platforms are emerging that combine elements of different funding models. Founder Helene Guillaume is a Virgin StartUp mentor and founder of Millenials Partners – here she shares her strategy for how (and when) to approach an angel investor.
“One of the most common questions I hear is ‘How to get funding?’ obviously; more specifically, ‘How to access angel investors, and how early should I contact them?’” says Helene. “To this common question, I would say the best way to get funding from an angel investor is to follow a good preparation path.”
“First define properly your startup, the sector you’re in, and who could potentially be interested in this sector,” advises Helene. “For example a fintech startup would naturally get you thinking about approaching investors from a financial background, but if it’s a phone payment system it could equally interest restaurant chains and other consumer-facing businesses.”
Think laterally about the possibilities that your product offers, and what industries it could be used in beyond the immediately obvious. Defining your product and where it stands will also ensure that when it comes to approach an investor you have a really strong sense of what you’re offering, why it’s important, and where it fits.
Define investor personas
“Now you’ve defined your own offering, define ‘personas’ – the profiles of typical investors that would be interested in your sector, team and profile,” says Helene. “KNOW your investor. If you know what they like and understand, you’ll be more likely to approach them with an idea that’s relevant and which they can feel passionate about.”
When constructing a persona, think about job role, industry, age, additional interests, and more. What sort of investor would give your idea a chance? What prior experience would you ideally like them to have? What do they normally invest in? Are they traditional, or willing to take a chance?
Create a list
“Once you have personas for your ideal investors, do your research – come up with a list of active angels you want to target,” advises Helene.
To find angels who might be a suitable fit, look at people who have invested in startups within your industry, or who invested in competitors. Attend industry events and find out more about the speakers; ask fellow entrepreneurs and mentor figures for their recommendation. Keep up to date with the business press and the deals being done in your industry. Basically, keep an ear to the ground and don’t skimp on research – there’s no point in using precious time and energy to approach an investor you know nothing about, and who could well be the wrong fit for your business.
“Once you have an exact list of people you want to reach, it's easier to get to know them, rather than doing it the opposite way round - wandering aimlessly around conferences and events trying to make random connections with people who may or may not be interested,” advises Helene. “Go on LinkedIn, see if you have any connections in common who could introduce you, go to conferences where they may be present or are speakers. This is the best way to reach anyone in general, whether you’re seeking funding, introductions, or even high level advisors. It means more initial work, but the results will certainly be better.”
“When should you approach investors? The earlier the better,” advises Helene. “Of course, have an initial good value proposition, but don't hesitate to start this process early on. Investment takes a lot of time, so start to build the relationship early. There's a lot of emotional rational behind an angel investment, so if the investor likes you and the team, they're much more likely to invest and bring you more than just money.”
Rather than rushing in and asking them to invest in you the first time you meet them, spend time building a reciprocal relationship, finding out if they’re the best investor for you, and get them interested in your business’s growth.