If you’re looking for funding, sometimes your best shot is an angel. But more often than not, your prayers fall flat and investors aren’t impressed.
Techopia's Craig Lord spoke to angel investors Laurie Davis and Rob Wood, members of both Purple Angel and Capital Angels Network, to hear their dos and don’ts of pitching to an angel.
Here's an edited transcript of that conversation:
Techopia: When you’re being pitched to, what’s your mindset going in? What are you looking for in an investment opportunity?
Davis: “It’s pretty straightforward: Do we think it’s going to be profitable? Although angel investing has the word ‘angel’ in it, it’s not some sort of gift from God. Our intent is to make investments that will return a profit. I wish we were always right – we’re generally not – but at the end of the day there’s got to be something you believe is the right kind of business with the right kind of people that can turn it into something that’s going to be profitable.”
Wood: “In very simple terms, very low risk, very high profit. We’re looking for things that may have an explosive, exponential growth. At the same time, we’re looking at all aspects of the business to minimize our risk. The people that are running it, what their experience is, how creative the technology is, what the competitive landscape is, what’s their business model, how creative are they. There’s a number of boxes that have to be filled in in order for us to move ahead.”
Techopia: What are the biggest dos and don’ts when you’re pitching an angel?
Davis: “Some people try to make things sound too complicated because they think complicated means sophisticated. If you can’t describe a business model for a startup company in a few sentences, there’s something fundamentally wrong with it. People sometimes have way too muddled of a message.”
Wood: “We need to know who you’re competing against and why you’re going to defeat them. And also a financial view of what investments you need and how you’re going to turn profitable.”
Techopia: What’s the best way to connect to an angel?
Davis: “Warm introductions always work better than cold introductions. I get asked this question all the time by entrepreneurs, and I always say there’s three answers: ‘Networking, networking and networking.’ They gotta get out there. Every day of the week there’s some event going on in Ottawa for entrepreneurs and you gotta attend these things, you gotta get to know people.”
Wood: “At the most basic level, we have websites that allow entrepreneurs to approach the angel organizations directly. There are also organizations that are cultivating startups, the Lead To Win organization, L-Spark, Invest Ottawa and the TiE organization.”
Davis: “At the end of the day, a city like Ottawa is a small community. We all know each other, either directly or one step removed. All those organizations Rob mentioned, we’re always talking. Getting into that community is an important step.”
Techopia: Anything else?
Davis: “It’s the team that’s the important thing. It’s a small group of people that are determined to make a product successful that makes a difference. It’s investing in people that have what it takes. Technology’s always great, market’s always great, but you have to have somebody who will make it happen.”
Wood: “We certainly see a range of entrepreneurs, from those that are very open to those that are very open to directional discussions, and there’s other people that are adamant that they know the route to success and are unwilling to take any input. Those, invariably, are the ones that get us in trouble. We’re very much looking into what sort of people are we investing in.