CNBC brought the concept of angel investors into the lives of millions of people across the world through its show “Shark Tank.”
Since 2009, founders of start-up companies have taken the stage,hoping presentations about their company’s success so far and potential for the future would convince a panel of “sharks” to invest in their company.
While the products and services these start-up companies createdwere all different in scope and lifecycle, the goal for the owners was quite simple — attract investment dollars from high-profile angel investors to vault the company to the next level.
The concept of angel investing has been around longer than “Shark Tank,” but the TV show certainly helped make it mainstream. With a rotating panel of sharks that has included Barbara Corcoran, Mark Cuban, Lori Greiner, Robert Herjavec, Daymond John and Kevin O’Leary, it’s not hard to figure out why, either.
Today, angel investors are a major source of funding for start-ups across the country. According to the Angel Capital Association, 90% of outside equity that start-ups raise is supported by angel investors. In total, angel investors divvy out an estimated $25 billion to roughly 70,000 companies each year.
It’s no wonder, then, that you might be hoping to attract an angel investor for your own start-up. But is your company a good fit for an angel investor? And if it is, are you ready to make your pitch?
Here are four questions to ask yourself as you decide whether an angel investor could be a good fit for your start-up.
1. Do You Have a Solid Business Plan?
Though it would be helpful, angel investors won’t necessarily need to see that your product or service can sell before they’re willing to invest. What almost all angel investors will want to see, though, is a well-defined business plan that is both realistic, organized and well-thought-out.
While “Shark Tank” must condense the pitches down to a few minutes for TV purposes, the reality is that angel investors won’t often make a decision on the spot just by hearing your pitch before they see a detailed business plan that includes detailed financials, projections, strategies, and distribution channels.
What they’ll be looking for is not that your concept has proven to work, but that your concept could realistically work based on detailed research (though, of course, proving it already works will make your life incredibly easier). Your business plan should include realistic projections that are based on market research, and also a plan for how you’re going to get there.
2. Does Your Business Have a Large Growth Potential?
Angel investors aren’t likely to dabble in deals that don’t provide arather large opportunity for growth. In other words, if it’s unlikely that your business doesn’t have a big growth potential, then angelinvestors aren’t likely to see it as worth their time and effort.
After all, most angel investors don’t give entrepreneurs their money out of the goodness of their heart. They do it because theywant a substantial return on their investment — especially since investing in early-stage startups is typically a risky endeavor.
If you want to attract an angel investor, then, it’ll be essential thatyou prove your business can scale. Being consistently profitable may be enough for you as the business owner, but an angel investor is going to want to see that you have the desire to see your business explode — and that you have the ability to handle and manage that growth.
3. Do You Have a Compelling Story?
Angels don’t just invest in companies; they invest in people. That’s what makes the in-person presentation of your early-stage startup so important.
The best way to engender confidence in angels is to have a compelling story that draws them in. This story could be about what makes you who you are. It could be about why your businesswas founded and what obstacles you’ve had to overcome already. It could be about the problem your business solves and how you can be the “hero” for your customers.
Angels will want to see that you’re passionate about your business and what it does. They’ll want to see that you’re willing to do whatever it takes to make it succeed.
Every business has a great story somewhere, even if it’s buried beneath the surface. Your job as the founder of a startup is to unearth that story and tell it in a compelling way.
4. Are You Working with a Partner That Can Help?
Finding angel investors without help can be quite difficult for early-stage startups. That’s why many turn to business incubatorsor accelerators for assistance.
Unlike other business incubators, sky incubator was founded with that sole purpose in mind — to support entrepreneurs from the ideas phase into revenue generation and fundraising. While they are primarily based in New York City and London, they have a large network of investors and mentors from all over the world that they can connect to your early-stage startup.
As a fully remote program, sky incubator doesn’t come with any of the physical limitations that some other accelerators do — especially in the age of the coronavirus pandemic. All work is done via videochats and Slack channels.
sky incubator works on a scholarship-basis, so companies that are accepted into the program don’t pay any money to benefit from their services. They also don’t take equity from the startups, which helps keep valuable assets in the pocket of the business owners.
Because sky incubator only accepts a small number of applicants, they’re also able to ensure they give personal attention to each oftheir members on a consistent basis.
For owners of early-stage startup companies, this personal attention and the fact that they won’t get lost in the crowd is essential as they try to move from concept to reality. Becoming a part of the sky incubator accelerator program can help you become better prepared to make your pitch to prospective angel investors.