Obtaining investment from angels can be a daunting, time consuming process, one that is inherently inefficient. Experienced entrepreneurs take steps to minimize these funding inefficiencies. These entrepreneurs have found that by obtaining an understanding of the angel groups investment criteria and objectives, and comparing their start-up’s focus and requirements with these criteria and objectives, they can significantly reduce the time they invest in the process. Essentially, they understand the need to focus during the funding process and do so by taking four easy steps to pre-qualify themselves from the perspective of the angel group and improve their startup funding efficiency.
- Industry Focus – Some angel groups invest across all industry sectors. Such groups may have members with experience across the spectrum, or they may have aligned themselves with industry experts who can support them on projects in which they lack industry knowledge or experience. However, such groups are the exception. Most angel groups have interests and experience in certain industries and therefore focus their investment efforts on those. Disciplined groups will not invest in areas outside of their defined focus. The entrepreneur can address this by screening out those groups which don’t invest in their industry or sector.
- Geographic Focus – Angels have differing reasons for investing in start-ups. While all expect the appropriate risk adjusted return on their investment, many invest to improve economic conditions in their regions, to support local entrepreneurs with their investment funds or for the opportunity to support the local entrepreneurs by sharing their experience through mentoring as members of director or advisory boards. Some simply prefer not to invest in opportunities, which due to their distance may be significantly inaccessible. Understanding where the angel group is willing to invest enables the entrepreneur to focus on those with which they have a geographic match.
- Investment Stage – Angel groups have varying interests due to differing experiences and risk tolerances. Some are very comfortable investing in concepts and seed level opportunities that need to be validated while others prefer funding companies with fully vetted teams, a commercialized product and significant sales revenue momentum. Experienced entrepreneurs recognize little value will accrue from pitching a concept stage company to a group which invests strictly in early growth stage opportunities.
- Investment Range – Different angel groups have diverse investment appetites. A larger, well established group with a particular industry focus may desire to invest a larger amount in a small number of opportunities in a single industry while another group may prefer to invest smaller amounts in multiple opportunities across a broader industry base. Such preferences will preclude the group from investing outside their focus. Knowing this investment level preference save entrepreneurs a lot of valuable time.
By focusing their efforts only on the angel groups with criteria which matches their opportunity and its needs, the experienced angel avoids the frivolous efforts of the shotgun approach, improving the efficiency of their effort.
Once you know where your start-up falls in these 4 categories, FundingSage’s Premier Tools help to focus your options.