Five Steps to Make Your Startup Standout to Angel Investors
By Tom Walker
CEO of Rev1 Ventures,
The competition for early stage investors’ dollars begins long before any investor pitch. Simple steps can improve your company’s chances with angels and VCs – and can set your business up for long-term success.
Pitching to Angel Investors
1. Dig into your own pockets first.
Use your savings. Tap into home equity or retirement accounts. Sweat equity is a given; risking your own money and assets takes your commitment to a whole new level. Why should an angel invest money in you when you are not willing to invest your own money in yourself?
2. Bootstrap, Baby!
Paying as you go with revenue instead of debt or equity capital is a double dip. Your startup gains operating capital plus invaluable feedback from early adopters.
It’s never too early to start building those productive relationships with influencers and decision-makers.
As you do the legwork to validate your business idea, collecting customer feedback through market surveys and interviews ensures that you won’t build a product no one wants to buy and creates the perfect opportunity to build trust with people who have the problems and pain points that your solution solves.
3. Cash Management is both Queen and King.
The success of any startup is tied to how far the company can stretch every buck.
Hold fixed costs to a minimum by residing in a business incubator with shared office services and equipment. Delay capital expenditures, from servers to desks. Lease instead of purchase. Sign month-to-month contracts whenever you can.
Treat variable costs like you are spending your own money—which you are. Seek trade credit terms with key suppliers. Don’t travel; use Skype. Investigate internship programs through local business schools. Negotiate fees—many service providers such as attorneys or CPAs have special rates for entrepreneurs.
4. Federal, state, or foundation grants, solicitations, and RFPs, can help fund prototype and beta product development
With grants, founders don’t give up equity. Additionally, since grant approvals typically require investigation and approval of experts with deep domain knowledge and experience, they lend credibility to a startup’s solution and business plan.
Stay tuned to state tax credits or other incentives from cities and states, such as low interest loans, to stimulate innovation regions.
5. Seek out strategic partners.
Every startup has the potential to create an opportunity for other companies that already serve the startup’s target markets.
For business-to-business (B2B) solutions, a good place to start is with companies that have sales relationships with companies in the markets you hope to serve. Your solution may fill a gap or giving them something new to sell. We’ve seen partners eager enough to help foot the bill.
Don’t overlook local or regional banks. Establish a line of credit if you can. Even if your business isn’t loan-ready yet, making friends with a reputable banker who has ties to the local business community can be a great asset.
With paying beta customers, relationships with strategic business partners, and a track record of efficient cash management, you’ll really have something to talk about at that all important angel pitch.
About the Author
Rev1 Ventures CEO Tom Walker has been helping entrepreneurs build great companies for most of his career. He’s formed multiple venture capital funds, founded angel groups, is an active angel investor and is the author of The Entrepreneur’s Path: A Handbook for High-Growth Companies.
Rev1 Ventures helps entrepreneurs build great companies by supporting them through the first phases of growth.