How start-ups can make themselves more appealing to angel investors

As we discovered earlier in the week, angel investors are becoming an increasingly popular way for start-ups to fund themselves...

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Large numbers of microbusinesses in both Britain and the US are now heavily involved with angel investors, as the next wave of entrepreneurs realise the value they have to offer in terms of sound business advice and financial clout.

But with so much competition for investment there are going to be increasing numbers of start-ups left disappointed, as investors opt to back rival businesses. So how can you safeguard against this happening to you? To get a better understanding of what angel investors are looking for we sat down with James Badgett of Angel Investment Network, a platform which connects entrepreneurs with angel investors.

What tips would you give to an entrepreneur looking to approach an angel investor?

Take a business as far as you can without the money. You can often make a lot of progress before you need to come to an investor. The better team, product, and proof you can assemble before asking for money the better valuation you can push for.

Make your document look good as first impressions are really important. Badly presented and badly branded documents are a big turn off however good the content is. Well-presented documents immediately set the brand and the competence of the individuals behind them.

We hate seeing business plans where the entrepreneur is trying to be clever in overly complicated language. You will not always be dealing with industry experts and your documents should be able to be understood immediately by anyone!

Work out what you’re good at and what you’re not, find people to fill the holes where you’re not so hot. The businesses that get funded tend to be the ones with the great team that understand each and every side of the business. This often means advisors and they don’t have to be fulltime, but they will bulk up the look of your team on paper.

What’s the most common mistake that entrepreneurs make with their businesses at an early stage?

 A lot of entrepreneurs try and value their idea too highly. This makes it hard to raise funds and increases the chances of having to have a ‘down round’. Also, being overly protective of their idea, some entrepreneurs don’t want to tell anyone their idea. You have to get it out there, network and gain a buzz. If having the idea is your only protection you don’t have a lot. It is the implementation of the idea that has value not the idea itself.

What one thing have you learnt about entrepreneurs during your time at Angel Investment Network?

The best entrepreneurs are open flexible and responsive. Your business is likely to change and you have to be dynamic enough to steer the course.

Investors tend to like tech, but also food and restaurants. They are often more exciting things to be involved in, which is often half the fun.

And on the flipside, what one thing have you learnt about angel investors?

Once an investor has made up his mind to not invest it’s impossible to turn an investor around. Move on and find a new investor. Make sure you tackle investor objections early on before they convince themselves they are not in.

What sort of businesses seem to fare well with angel investors?

Mainly investors like business they can understand the problem it is trying to solve. Often business to business investments are harder for this reason. They may not have faced human resources problems to see how elegant your solution is.

Investors tend to like tech, but also food and restaurants. They are often more exciting things to be involved in, which is often half the fun.

 Are there any funding models out there which you think may represent the future?

There are a few new funding models appearing, but we believe that angel investors still offer the best route for entrepreneurs as they get the benefit of serious business men who bring contacts and advice.

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