My friend Marty Zwilling posted an interesting article a few days back on presenting to angel investors, which bears reposting here, with our usual editing on it.
Marty’s central point was that seasoned investors who have had some success might charge you a fee, and this is to be expected, but that there are several other things that a prospective entrepreneur ought to do when presenting to potential investors:
1. Be realistic about expectations of funding success. Only about 3 of 100 companies that initiate funding requests ever get funded, so don’t expect to get funded the first time you pitch your idea.
2. Improve your odds by networking and warm introductions first. The internet has made it increasingly easy to find investors (we’re not sure how), but an introduction to an investor is still the preferred method. This is known as a ‘warm’ introduction.
3. Evaluate feedback from investors first. If you have had no feedback, or negative feedback on your pitch to investors, evaluate what they’re teling you. Don’t assume they’re all crazy because they didn’t hear or didn’t love your idea. They probably had specific reasons for the turndowns, and you should improve your pitch and your plans from this feedback.
4. Weigh the cost against the track record and reach of a specific angel group. Find out what their track record is of actually funding investments. It doesn’t hurt to ‘take their temperature’ at some point in your presentation, but we would recommend evaluating their track record even before you pitch. Have they funded other companies in your industry?
5. Consider your startup stage. If you’re a young company, with inexperienced founders, your odds of success in attracting angel or venture capital are really low. You have to find more experienced management to have a realistic shot at funding. If you’re at least operating and the metrics are pointing towards success, you have a much better chance. Mark Zuckerberg is a classic example.
6. Don’t wait until you are desparate. Investors can spot an out of money entrepreneur a mile away. They’re less likely than normal to fund you under these circumstances, because it’s obvious that you didn’t manage your initial funds very well.
Keep in mind that most investors are not out to grind you down and/or steal your idea. But, they didn’t accumulate their wealth by being stupid, either. They’re realistic businessmen and women, and you should approach the pitching with the same sense of realism.