How to Make Your Startup Attractive to Angel Investors

Angel investment is one of the most common capital sources for both startups and relatively new companies looking to expand. But drawing high-net worth individuals toward an early-stage enterprise or business proposal requires well placed effort. First of all, angel investors can’t fund something unless they know it exists, which means you’ll need to focus on getting the word out in the right circles. Second, they’re unlikely to bet on a venture unless it offers a substantial return. So a sound business plan and credible growth and revenue strategies are key.

However, according to research by Shai Bernstein (Stanford Graduate School of Business), Arthur Korteweg (University of Southern California Marshall School of Business), and Kevin Laws (Chief Operating Officer of AngelList), arguably the most important factor is the quality of the personnel that the candidate organization has assembled.

Exceptional founders, and a reputable team.

Bernstein, Korteweg, and Laws’s analysis indicates that the presence of visionary founders and reputable staff on a startup’s team is a big draw for angel investors. The data further suggest that experienced angels are likelier than inexperienced ones to emphasize the importance of the people factor. Angels with a lot of investing background are also likelier to take a chance on a promising startup or fledgling enterprise than are newcomers to the profession, who may prefer to “play it safe” by betting on companies that already have some traction.

Seek out promising angels, and do research on them.

Many angels specialize in a particular industry or niche, and it’s a good idea to seek out individuals whose areas of interest or specialization accord with your own, particularly if your proposal is esoteric or technical. Find out what sort of endeavours those investors have funded in the past. You can even attempt to contact previous beneficiaries of the angels you’ve identified as prospective funders of your project, to ascertain what worked in the past and what those angels tend to look for.

A strong pitch.

If you’ve ever watched a full episode of the American network television program Shark Tank—or its Canadian counterpart, Dragons’ Den—you may already have a good idea of how to distinguish a high-quality funding pitch from a lousy one. If angel investors invite you to pitch to them, you need to be ready.

Aim for a duration of around ten minutes—enough time to cover all the essential information without rambling or rushing. If your presentation is in digital format and consists of slides, anticipate spending around one minute on each slide. However, make sure you also have an analog Plan B in case of technical difficulties, which have a nasty habit of cropping up unexpectedly right at the moment of truth.

Unconventional ideas can be powerful in the business world, but in the context of a funding pitch, a pair of conventions are worth observing. One is appropriate attire—you should strive to portray yourself as a consummate business professional and/or choose an outfit that’s suited to your line of work. Another is the hook—you should begin the pitch in a way that piques the investors’ interest. Present them with a problem or dilemma they can relate to, and offer them an innovative solution.

 Answer the following questions in your pitch:

•  What have you and your team accomplished so far?

•  What does your target market/demographic look like?

•  Who are your competitors?

•  What is your strategy for both marketing to customers and delivering your product or service to them?

•  How do you generate revenue?

•  What do you anticipate your revenue stream would look like over the next five years if you met your funding goals? Is your assessment realistic?

•  How much money do you need from the investors to whom you’re pitching?

•  What is your endgame? Do you plan to eventually take your business public, sell to an established firm, or something else? (Angel investors like to know how they will recover their investment.)

Finally, rehearse your pitch until you know it like the back of your hand. Run it by a trusted friend—if s/he would invest in your business or proposal, there’s a good chance that an angel would too.

Tactful Self-promotion

In most facets of life, it is wiser to err on the side of moderation than to indulge in excess. The same

is true of the way we portray ourselves to others: confidence and self-assuredness, especially when grounded in a realistic appraisal of one’s own abilities and expertise, are admirable traits; on the other hand, cockiness, false modesty, and “humblebragging” tend to elicit disdain.

So, how can you project an air of confidence and proficiency without seeming arrogant? What is tactful self-promotion, and how does it differ from boastfulness?

Authenticity is key.

Human beings are by nature social animals, and consequently, our desire to engender a positive first impression profoundly influences our interactions. In situations where we have a significant stake in the outcome—like an investment funding pitch, or a first date with a person in whom we have a romantic interest—the motive to put our best foot forward is even stronger.

However, according to Harvard Business School professor Francesca Gino, our intuitions about the strategies most likely to impress the target of our self-promotional efforts are often misguided—namely, we tend to underestimate the value that others place on perceived authenticity. Studies conducted by Gino and her colleagues Ovul Sezer and Mike Norton suggest that humblebragging (for example, claiming in a job interview that your greatest weakness is a tendency to work too hard) is likely to instill an unsympathetic impression in others: the opposite of the desired outcome. Revealingly, their research found that the interviewers’ opinion of seemingly insincere humblebraggers was even less favourable than the same interviewers’ perception of chronic complainers.

Build relationships.

No one likes to feel used. Accordingly, it is important to approach other people as potential friends, allies, partners, and associates, and not merely as means to an end or targets of an impromptu sales pitch.

Introduce yourself by describing your profession and/or significant interests in about three seconds. (See “Perfecting Your Three-second Statement”.) In conversation with individuals to whom you hope to appeal, make use of open-ended questions (beginning with who, what, when, why, how) and listen attentively to their responses. Concentrate on ascertaining their wants, needs, and objectives. Then consider how you can contribute to the fulfillment thereof.

Add value.

You know what you do well, but your interlocutor may not. Specifically, prospective employers, investors, clients, or even potential romantic partners will be interested to know what you have to offer, and how they would benefit from becoming more acquainted with you.

If you feel you have a good understanding of the wants and needs of the individual to whom you hope to promote yourself, you are about halfway to your goal. At this point, rather than simply claiming to excel at X or Y (which can rub people the wrong way), an alternative technique is to recount an experience where your skills in a particular area served you well, or enabled you to overcome a challenge. A common saying in journalism circles is “show, don’t tell”, and for good reason: the facts often speak for themselves.

Rely on talking points rather than a fixed pitch.

This point should not be construed as denying the importance of a sound elevator pitch, but in real life, the context in which a conversation occurs informs its tone and content—and a rigid, memorized pitch may seem out-of-place. Therefore, it is worthwhile to have talking points in mind: pieces of knowledge or insight you can invoke that will offer people a better sense of who you are, your areas of skill, passion, and knowledge, and what you aim to accomplish. Stay abreast of news headlines too, especially items that are relevant to your areas of expertise, and be prepared to discuss at least two current events at social gatherings.

The ability to communicate those points effectively, while showing genuine interest in the people you meet, is the key to promoting yourself without sounding like a braggart or tawdry careerist.

Guidelines for Pitching to the Media

There is arguably no form of advertising more effective than a favourable news story, broadcast segment, or article in an industry publication. The endorsement of a trusted media professional can expand your prospective market, and engender public trust and goodwill toward you and your business. Many businesspeople appreciate the importance of effective media relations, but there is a right way, and countless wrong ways, to communicate with media outlets.

This post will recommend some general best practices for business marketing communications with the media, and detail a few “pet peeves” to avoid.

•  #1 rule of thumb: Respect media professionals’ time.

Media professionals tend to have full schedules, and are obliged to keep their interactions with PR and marketing departments brief. If you respect their time—or better yet, can save them time—there is a greater likelihood that they will respond positively to your pitch.

•  Personalize your communications with media professionals.

Many journalists and industry writers specialize in a particular subject area—or, in media lingo, a beat. How familiar are you with the recent work of the journalist, publication, or news organization you hope to reach? Have you been in touch with anyone at that that outlet before? Who are its competitors?

Before you pitch story ideas to writers, editors, or broadcasters, make a point of getting to know them and the sort of stories they cover. This will improve your chances of delivering information that is both relevant to them, and of interest to their regular readers/audience.

Each e-mail should be tailored specifically to one individual—avoid sending identical bulk e-mails to many different people.

Always confirm the name, gender, and appropriate honorific of the person to whom your e-mail is addressed before you hit the “send” button.

Don’t pitch to a media professional unless you’re reasonably confident that person will be interested, and hasn’t recently covered a very similar or identical topic. Otherwise, you will give the impression that you’re a self-promoter who can’t be bothered to do your homework—not a good start.

•  Get right to the point.

The majority of “hard news” stories are written in the inverted-pyramid format—the most compelling pieces of information appear in the lead sentence, and then greater detail and context follow. Likewise, marketing communications on behalf of your business should be succinct and lead with the most eye-catching pieces of news right away. Toward the end of the text, provide times, locations, and contact information to facilitate follow-up calls and/or e-mails.

Some marketing departments try to entice media professionals to pursue a story by strategically withholding information. Don’t do this. The people you’re trying to reach will rarely take the bait, and may even resent your efforts to sidetrack them.

•  Learn each media professional’s preferred mode of interaction.

Many media professionals don’t mind follow-up phone calls, but some prefer to confine all of their interactions with marketing departments to e-mail. Once you know the preferred medium of the person you’re trying to reach, make a note of it. Don’t call up people who prefer not to receive phone calls, or send the same e-mail to the same person multiple times over the course of a day.

When the time comes, be prepared to take “no” for an answer.

•  Clarity, concision, and quality are important.

Try to convey your message in as few words as possible, while avoiding insider jargon and rambling. In many cases, time-constrained media professionals will simply re-purpose press releases and publish them as news or advertorial stories, or transform them into broadcast segments. The better they understand the content of your communicational materials, the quicker and easier this will be for them.

•  When in doubt, hold off.

It is not unusual for some media professionals to receive hundreds of e-mails and dozens of phone calls each day. So pick your spots, and hold off unless you’re reasonably confident that your pitch is buzz-worthy. If possible, seek the opinion of a disinterested third party whom you trust not to leak privileged information. Is s/he as excited about the story as you are?

How to get a Distributor to Represent your New Product

You could have the most amazing product on the planet but without proper distribution to get that item out into the marketplace, you're going to end up with a warehouse full of inventory wasting away. The right distributor will get your product to as many potential customers as possible but how can you find that partner?

The following steps should provide an informative road map for picking a distributor for your new product.

Step 1: Do Your Research

Find out who is distributing similar types of products in your area. The big brand name players handle their own distribution, but as a small business start-up you should be able to find many options in your neck of the woods. You can also ask for recommendations from other business owners. Another great resource is an industry trade show. You're sure to make many contacts there for potential distributors.

Step 2: Set Up Interviews

Once you've narrowed down your list to the top picks, you'll want to set up meetings to pitch your product. Keep in mind that you're looking for a viable partner not someone who is just going through the motions of shipping your product from one outlet to another. You want them to be excited about the product that you're offering. If you don't get a strong sense of their dedication then they're not going to be the right partner for you. 

Step 3: Get the Stats

As you get down to the top candidates, you'll want them to "sell" you on their abilities. Ask for previous sales figures, marketing campaigns and how much reach they'll have across the country. Can this distributor roll out a product nationwide or are they restricted to a single coast region?

Step 4: Crunch the Numbers

A distribution fee will be factored in as a percentage of your production costs. The key is to keep those costs down in order to improve your profit margins. You might find that the distributors you are considering are all offering the same rates. However, a one or two percentage point difference can add up to substantial savings.

Step 5: Work Out the Process

You want to clear about expectations on both sides. How will you get your product to the distributor? What will the payment structures be? Who will be handling quality control and tracking? 

Step 6: Check References

Finally, you'll want to follow up on the references provided by your distributor candidates. Call up those businesses and find out how effective those distributors have been. Make sure to ask about any problems they might have had.

The best decision to make is an informed one!

Small Business Financing - It's All About Who You Know

Believe it or not there are plenty of folks out there looking to invest in a small business. Your challenge is to get your business plan in front of them. Easier said than done, right? Actually, if you apply yourself you’ll find that it’s quite easy to build a network of potential investors. First, make sure you have a rock solid business plan ready to go. It makes no sense to seek out investors unless you’re ready to pitch. You might get only one shot and you have to be ready. Here are some tips for building up a network of investors.

1)      Go Online

There is a huge social network waiting for you to explore that is only a few mouse clicks away. LinkedIn is the most obvious choice to start your campaign to connect with potential investors. Here you’ll have a chance to build up a professional profile and find other business professionals who might be able to help. A connection you make on a site like LinkedIn might not be in a position to write you a check but they could connect you to someone who can.

2)      Try Crowdfunding sites

Beyond the direct networking possibilities of social media, there is another burgeoning source of investors you could find online and that would be with group funding. A site like Kickstarter is bringing together pools of small investors who are willing to share their funds with a business that looks promising. Once again, you have to be ready to fire up your business machine and answer any question in a competent matter.

3)      Ask your family and friends

It’s amazing the amount of help we can get from our family and friends if we just ask. You might have a favorite aunt or uncle who is willing to take a shot at investing in your business. As long as you treat them as you would any other potential investment then there is no reason not to present them with a business plan. Just as your online network could help you bridge the gap to meeting potential investors, you might have a friend who works for a company or has their own relationship with a potential investor. Throw a friendly dinner party and make your pitch. Keep it honest and sincere and you’ll reap the benefits.

4)      Network at events

This is a no-brainer. There are plenty of tradeshows geared for entrepreneurs to help them connect with investors. Seek them out but don’t stop at the tradeshow. Follow the money. This means going to places where the “money” would hang out: a country club, museum opening, first night at the opera, polo pony matches… wherever you might think that serious minded business professionals would gather you should try to infiltrate. This doesn’t mean barging in with your stack of business plans ready to hang out. Go make some new friends and see where that takes you.

Lessons Learned From Pitching Venture Capitalists

 

Raising money is as much a part of business as the goal of making money. As the old adage goes, “You’ve got to spend money to make money.” There’s an even older adage which posits, “Never use your own money.” One of the most popular sources of funds – especially for startups - is venture capitalists (VC), those who provide money in exchange for large ownership stakes.
 

Due to their popularity, VCs are extremely busy and hear thousands of pitches in a month. Out of that many, they invest in only in handful, hoping for a very lucrative exit in a short amount of time. To pitch a VC for financing requires the founders of a startup to not only be well versed in their own companies, but also do extremely detailed research on their potential investors. Not doing your research will make the difference in getting funded millions of dollars or being delegated to the black hole of has-beens. The following tips are some valuable lessons to learn about pitching VC’s and getting your startup funded.  

            Do Your Homework

Every venture capitalist you’ll be pitching to has their own distinct personality. You need to get as much background information on that potential investor as possible. Don’t just Google them but ask around – especially other investors. Do they have a short attention span? Would they prefer to see the bottom line numbers first and then the “sizzle?” What other successful businesses have they invested in? Why did they make those investments? In many ways, you’ll be giving the same basic pitch to every venture capitalist but if you can adjust to their investment criterias and individual personalities you’ll be ahead of the game.

Be Smart With Your PowerPoint

One of the most popular (and easy to use) skills for any business owner to have is the use of the PowerPoint presentation. This is not something you should be slapping together the night before the big pitch. Instead, it’s something you should be developing since the inception of your business plan. An effective PowerPoint presentation can’t stand alone. You’ll still need to “narrate” to fill in the gaps from your bullet points but you shouldn’t become top heavy with data. If you can make your point with a strong visual then go for it. Before building your PowerPoint, go online and view other presentations. Take note of what you like and “borrow” the idea.

Have a Thick Skin

Every entrepreneur walks into a VC pitch with dreams of walking back out with a check. That’s not going to happen. What will happen is you’ll be grilled aboutyour business. This is a good thing. The more you can engage that investor the better off you’ll be. Make sure you listen clearly to any question and think through the answer before blurting out something you think they want to hear. You’re not going to get the same reaction twice. Don’t let that throw you. Remain confident in your proposal and if they don’t bite move on to the next investor.

 Pitch the Facts

It’s great that you have conviction about your business idea but you can’t let that passion become pie-in-the-sky thinking. Over-valuing your company is the quickest way to turn off an investor. If you’ve got grand assumptions to make about business projections you better back it up with more than sweeping generalities. Just because the dog food industry is a multi-billion dollar business doesn’t mean your brand of dog food is guaranteed success. Sell your passion but back it up with the facts.

 

Is Crowdfunding the Best Strategy for Your Startup?

In the last few months, there has been a new trend in startup investing that has gotten the attention of the VC world.  Taken from the idea of crowdsourcing - crowdfunding allows the smaller investor to get into investing into a potential startup by mitigating the risk with a group of people.

As Blake Coler-Dark mentions, crowdfunding is.. “The ability of many individuals to fund a specific project or individual.”

This is what makes crowdfunding so appealing to many people - it gives people the opportunity to fund a project that they really believe in, with minimal risk. This engages a much wider group of people, who want to be in the forefront of great ideas or projects but may only have $20 to contribute. Crowdfunding lets everyone get in on the fun of investing in a new project.

One of the more popular crowdfunding sites is Kickstarter. Kickstarter’s funding process is simple. You’ll be given an opportunity to pitch your business to the Kickstarter community and if the crowd likes what they see, they’ll start providing the funds.

Don’t get this wrong. This isn’t free money; these are considered investors according tax law who expect to be paid back. But it’s a good way to get capital fast, especially for startups who have not had success in the traditional financing route with bankers.

How is this a good strategy for your startup? Consider these potential benefits of crowdfunding:

You’ll Get Instant Validation of Your Business Idea

Setting your business up for crowdfunding investment means you’ve really got to put yourself out there. Think of this as a kind of audition for your company. If you’ve got a great idea whether that’s for a restaurant, a dog grooming business or cleaning service you’ll know right away if yours is a good idea for this investment community. If no one bites, it might be time to rethink your business idea.

You’ll Sharpen Your Marketing Strategy

Many crowdfunding sites allow you to post videos or photos as part of your business pitch. Just like you’ll be instantly told whether your overall idea works you’ll also have an instant response to your marketing campaign. Yes, your pitch isn’t the same thing as a television commercial but you’re still tossing out what you think is the best approach to selling your product. The amount of money you receive will tell you if your pitch worked or not.

You’ll Get Help

By tapping into crowdfunding you are basically taking on many new business “partners.” This doesn’t mean that all the investors are going to be chiming in with how you should be running your company but there could be a vast amount of knowledge that you can tap into besides the investment.

For instance, a restaurant owner who is looking to expand their business might find a former restaurant owner among the crowd who can offer sage advice. There could also be a contractor which might offer a good deal on the work. The bottom line is that you just don’t know who might be in your crowd that will be a help for your business.

You’ll Get Better Organized

Anytime you seek out investors for a business you have to be organized. Investors want to know their money will be put to good use. This means providing a business plan and opening up your books for inspection. If you’re not organized then you’re not going to attract any type of investor. Knowing you’re going up on “stage” will get you organized rather quickly.

How's Your Elevator Pitch?

Wouldn’t it be great if we could conduct all of our business in the time it takes to ride in an elevator from the top floor to the parking garage? Imagine how quicker decisions would be made.

Actually, that’s exactly the approach you should take when developing a pitch about your company to potential investors. Can you communicate what your company does in 60 seconds or less?

Here are some tips to help you develop a stronger “elevator pitch” that can help with your small business fundraising plans.

1)      Watch the Clock: Any pitch you make for your business should be concise and impactful. The goal would be to get the perfect description of your company, its benefits and future plans all down to a 30 to 60 second pitch. Remember the goal is to interest the potential investor about your company in 60 seconds. All you want is to hear are those three magic words: “Tell me more.”

2)      Offer a Solution: Your business should be built upon the premise of solving a problem. Whether selling a cleaning product or an accounting software program, you have identified a problem and most importantly you’ve created a viable solution to that problem. That’s what should be in your pitch: What is missing in the marketplace and how your business can fix that.

3)      Stay Genuine or Keep it Simple: By the time you get a face to face meeting with an investor they’ve heard plenty of pitches. This means they’ve heard all the “business speak.” You’re not going to impress anyone with buzz words. Tell the story of your company and its successes in plain English. You’ll get a lot further that way.

4)      Know Your Investor: While it is true that you never know who you might end up in an elevator with, chances are you’ll know who you’re pitching your business to. Do your homework so that you understand just who this investor is and what they are looking for. You might have to adjust your pitch to fit an investor but that shouldn’t be a problem once you’ve worked it all out in advance.

5)      Speak From the Heart: Yes, the bottom line is crucial but so is passion. An investor wants to know that you’re going to be working extremely hard with their money. Don’t be afraid to show them your passion and commitment; just don’t take it overboard.

6)      Have a Call To Action: If you sell the “idea” of your business then your investor will want to know what’s in it for them. Every pitch should end with a call to action. Even something as simple as “Can I send you a business plan?” should be followed up instantly with “And when would be the best time to reconnect?” Unless you get turned down in the room, you’ve got a door open.

It will be up to you if you can walk through or not!