[Guest Blog by Bryan Brewer]
Most angel investors are looking for three main things in a potential startup investment: (1) a fundable company, (2) a business story to believe in, and (3) a likeable and trustworthy CEO.
A Fundable Company
Investors know that startups are imperfect. Virtually no early-stage company is going to have a hot product already on the market, a high-margin recurring revenue model, strong competitive advantages, a stellar management team … and great deal terms for investors. Each startup – almost by definition – is a work in progress, with plenty of room for improvement.
Investors do expect that a company will have enough critical mass in these key business areas to merit their attention. That’s why I developed the Minimum Fundable Company Test, a free self-assessment tool to give you a measurement of the fundability of you company.
What you don’t want to do is to approach investors before your startup is ready, and the MFC Test will help you see what you need to work on. Get these fundamentals in place first, and you’ll have more success at getting investors interested in your company.
A Business Story to Believe In
Since investors see numerous deals for fundable companies – many of which may seem logical and reasonable from a business point of view – how do they decide which ones they are interested in?
Well, this is a key place where emotional factors come into play. Investors naturally gravitate toward businesses that have an exciting story to tell, a story that is memorable and that also resonates with the investors’ desires and life experiences.
What was your “aha moment” when you conceived of your business? What urgent unmet need did you find a way to address? How have customers benefited from your solution? Answer one or more of these questions in a compelling way when you pitch to investors, and you’ll win their attention, their hearts, and hopefully their pocketbooks as well.
A Likeable and Trustworthy CEO
Angel investors know that if they write you a check, they are entering into a relationship that typically lasts between five and ten years. (Note: The average length of a marriage that ends in divorce is only eight years!) So it makes sense that an investor would want to have a long-term business relationship with a likeable person. Life is too short to head into a deal with a CEO you don’t like, even if it is a highly fundable company with a great story. So, yes, your likability does make a difference.
Finally, the trust factor should be obvious. After all, if an investor is putting $25,000 or $50,000 of his or her own money into your company, the investor wants to feel comfortable that you will not squander the investment. That’s why it is critical that you build a solid reputation for high integrity and that you do nothing to damage your credibility, even in the slightest way.
Build a fundable company, tell a compelling story, and demonstrate your likeability and trustworthiness, and you’ll be a long way ahead of the many other companies seeking angel funding.
To find out for yourself what angel investors are looking for, please attend the MITEF Venture Lab program on April 20, 2016 entitled “Meet the Angels.” A panel of representatives from the major angel investor groups in the Seattle area will give an overview of their programs and will answer questions from the audience. This is a great opportunity to meet and talk with local angel investors.
Bryan Brewer is the founder and CEO of Funding Quest.
Bryan has consulted with startup companies since 1999, helping his clients raise more than $50 million in angel investments. He has seen well over a thousand investor pitches. Bryan is also the creator of the Minimum Fundable Company Test, a no-cost self-assessment tool for entrepreneurs that measures the fundability of a startup company. A startup that qualifies as a “minimum fundable company” is deemed to have enough of the right stuff to attract the attention of investors.