Angel Investors have 10 investment commandments when it comes to funding decisions. Any company seeking investment capital should know these.
1. If it doesn’t feel RIGHT – PASS. Angel Investors analyze hundreds of companies every year and as a result gets a sixth sense or ‘feel’ for what is right for them… and if it doesn’t feel right they pass on it.
2. Dealflow: There is NO SHORTAGE of DEALS. There is always the next deal. There are always more entrepreneurs looking for funding than there are funds to invest. So, for angel investors there is no rush to invest.
3. INVESTING takes TIME to LEARN – be PATIENT. An angel may spend days working on one deal. Meetings, performing due diligence, negotiating, studying management, determining how the investment will be spent on marketing and production or facilities, etc.
4. VALUATION matters – for EVERYTHING. What is the value of the present, and more importantly, the future company. How is this calculated and does management place a realistic number on value?
5. FOCUS on the 10-20x RETURN POTENTIALS Angels always focus on the future and what return they can achieve on their investment in the shortest time possible. They focus on the largest, fastest return potentials.
6. JUDGMENT is OVER-RATED. FIND the BEST PEOPLE in each MARKET Angels look for the best managements in the markets they are investing in. They do not invest based on their own judgment regarding management.
7. Invest ONLY in Your Spheres of INTEREST The best angels stay within the industries they know so if your company is outside their sphere of interest don’t expect to obtain funding.
8. HARBOR NO OPINIONS. Listen and USE INTUITION Angels do not attend pitches with any preconceived ideas about the investee. They listen and use their instincts to decide what comes next.
9. DEVELOP Your INSTINCTS All angels develop a set of instincts to guide their decision making and use them: regarding management, the market, and the product/service.
10. Look at a LOT – Invest in a FEW The hit rate for an average angel investor is one out of 80-100 pitches.
When pitching to an angle make sure you understand their motivations and the ‘code’ of investment commandants they adhere to.
Share your funding stories. Tell us about your experiences with angel investors. Go to firstname.lastname@example.org