Abstract

Many  Startup Founders are interested in  finding  Angel Funding.  Many startup businesses need funding in order to realise their plans. As a result of the downturn and GFC, traditional capital sources such as Venture Capital are less interested in investing in early stage businesses.  Many founders do not know where to look for Angel funding or what documentation they may need in order to attract angels..  Leading web based startups are using angel groups a a way of identifying and engaging with angel investors..

Body

Tip 1 - Don't  consider traditional venture capital

Recent changes in the financial environment and reduced the traditional sources of venture funding. Many venture capital firms, in search of a quick return have moved to investing in later stage deals.    Many founders are not aware that alternative investment sources are now responsible for the majority of early stage capital raising. At the forefront of these changes are the hidden opportunities with Angel investors.   Consideration needs to be given to alternative funding sources. Linkedin provides some interesting opportunities for dynamic entrepreneurs to market the their opportunity and access funding from Angels and angel groups.   If you are not already on linked in, sign up for free. Once you have signed up, start to look at groups related to start up funding. Even if you don't manage to source investment this way, you will most likely find valuable discussion that can guide your capital raising efforts.

Tip 2 - Ensure you  identify you local angel community peak body

Many leading Angels are members of their local community venture capital groups. They often join these groups to access and share knowledge. Many angels invest in syndication with other angels, and these groups provide a means of facilitating these syndicated transactions.   Founders are often unaware that that local, state and national angel groups exist. Many even have dedicated events where you can pitch your opportunity.   Whilst linkedin is great place to start to build your network, you really need to get on the web and search {your area} and the word angel group. This will help you to identify angel groups in your area.  

Tip 3 -   Find out what documentation angels require in order to make an investment

Investment is undertaken on the basis of documentation as well as personal factors. Whilst an angel may like you, they are are really interested in what is your plan, and the longer term financial implications of that plan.   Entrepreneurs are usually not excited about creating documentation. Documentation can slow them down! This cultural element often means that entrepreneurs go into meetings with angel investors ill prepared.   There are 3 primary documents you need to consider before approaching angel investors. Firstly there is the investor overview. A great investor overview should provide some high level details on your opportunity without the need for a Non Disclosure agreement. Secondly you need a pitch pack. Your pitch pack should be no longer than 16 slides. Ensure that you focus on the business opportunity, not your technology or product. Finally you need a great business plan that lays out how you are going to turn your concept into a viable ongoing concern.   To see some examples of great documentation that has been developed with the benefit of 20 years experience in raising early stage funding, just Google Business Planning HQ.

Tip 4 -  Also Consider carefully positioning your valuation from the outset

One of the most significant turn-offs for investors is a valuation that is out of the ball park. To correctly position your deal you need to understand the ball park valuation that Angels are placing on similar deals to yours.  Many entrepreneurs have absolutely no idea what valuation is realistic. Many just use 1% of the market figure and then use a Net Present Value calculation to determine their value. To many investors this is unrealistic and does not demonstrate the required level of thought.  Both bottom up and top down valuations need to be developed. A bottom up valuation indicates how, within your financial means, you can grow the business organically. For example you can't instantly go from 0 distributors to 100. How many people will you have recruiting distributors, how many visits will they undertake and what will be their rate of success. To arrive at an appropriate valuation that will hold water with Angel investors, consider preparing a detailed bottom up forecast of your business, but beware, this can take some time, and considerable thought.

Summary

Some  Startup Founders find that  Many founders do not know where to look for Angel funding or what documentation they may need in order to attract angels.  Leading web based startups are using angel groups a a way of identifying and engaging with angel investors.  To resolve this issue there are a number of key steps that can be taken.   carefully positioning your valuation from the outset      To see some examples of great documentation that has been developed with the benefit of 20 years experience in raising early stage funding, just Google Business Planning HQ.   To arrive at an appropriate valuation that will hold water with Angel investors, consider preparing a detailed bottom up forecast of your business, but beware, this can take some time, and considerable thought.