When you're a startup looking at your investment options, you may be considering angel investment - but are you ready, and what should you be doing first?
Shruti Ajitsaria is the head of Fuse, Allen & Overy's tech innovation space. We asked her a few questions about how startups interested in gaining angel investment can take those first steps towards it.
Ways to get started
Start speaking to people you know and ask them to spread the word among their friends, families and colleagues. You might be surprised by how many people are interested in making investments, particularly where the amount of investment is low and the potential upside is potentially huge. Speaking to people will enable you to refine your ideas, but also help your sales pitch to clients as you start to commercialise the product. Often, a founder will be working on their own and it is important to take opportunities to discuss your ideas with others.
How does a startup know they're ready for angel investment?
At the very least, you need to have a very well-formed idea of what you want to do (even if that later changes). Its helpful to an angel if they can see something, even if it is just a MVP. If you have validated your hypothesis and can prove that you are solving a real problem (and that someone will pay for that solution) through market research or otherwise, that is helpful.
What does the typical angel investor look for?
My personal view is that there is no such thing as a typical angel investor. I invest alongside my husband, and even between the two of us we often have divergent opinions. There are lots of things which will feel into an angel’s assessment as to whether to invest, but for me personally, the most important thing is the team. I am looking for a founder who I like and trust; who has the experience and skillset to be capable of executing their business plan; who can identify their own strengths and weaknesses and build and lead a team around that; and someone who will have the ability to pivot when things aren’t going to plan.
What are good resources for startups seeking angel investment?
Educate yourself. There are loads of online resources, co-working spaces and networks that you can access. The start-up community mostly operates with the “give-first” ethos and people are generally very happy to share experiences and open their networks.
What are the common mistakes startups make when seeking angel investment?
Founders often look at investment from their own perspective – how much money do they need, and how much equity are they prepared to give away. They don’t realise that a good angel will be coming on the journey alongside them – helping them to increase their network, identifying opportunities and helping them to fundraise down the line. In many ways, a good angel will act as an informal advisory board. So choose your investor according to what they can help you with, rather than purely just based on the valuation they are prepared to invest at. Secondly, you need to remember that an angel is investing with the intention of making a return – so you need to make it easy for them to see how you hope to get them to that point, using as much data as possible.
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