Belarus, Minsk, pr. Masherova 1While some entrepreneurs may accomplish this with ease, others may simply experience anxiety, answering the presented questions with hesitation and doubt. Every new business owner, who is seeking angel capital, should properly prepare for the moment when they meet with angel investors to avoid rejection. Here are some questions that the entrepreneur may encounter:
1. Tell us about yourself and your company.
The entrepreneur should give a brief introduction about him/herself, including credentials and education, and other pertinent background information in their opening. A general idea of the company should then be mentioned, followed by the company objectives, as well as the different products and services offered.
2. Who are your major competitors, and what makes your products and services unique?
Entrepreneurs should be prepared to mention any market opposition and how their products and services will give the business the competitive edge. Since market competition can be relentless, it is always a good idea to provide solid examples.
3. Who are your targeted customers, and how have they responded to your prototype?
Angel investors are always curious of demographical information, including the targeted market and consumer base the new business will appeal to. By creating a prototype of the business idea(s) and welcoming consumer response, the entrepreneur can further refine his/her prototype according to customer feedback. It may take multiple revisions before an actual product is mass produced; therefore, it will be wise for the entrepreneur to recruit potential customers to support his/her sales and even use them as references to encourage their deal with angel investors.
4. What is your marketing strategy for your products and services?
This includes an entrepreneur’s approach in promoting the business through advertisements, internet marketing and promotions, and public relations to increase sales and achieve a competitive advantage. Marketing can be quite costly, so it is extremely important for the entrepreneur to include this estimated price in the financial plan.
5. How much angel capital are you seeking, and how will this investment amount be distributed?
It is always a good idea for entrepreneurs to provide an estimate of the amount of angel capital they are seeking for their startup. By presenting the angel investor group with financial outlines and predictions, the entrepreneur will gain credibility in conducting their own due diligence (financial research) for their company. More impressive is the rough draft or summary of how the angel investor capital will be dispersed (i.e. rent, utilities, technologies, salaries, etc.)
6. What time frame do you expect the invested money to last?
This basically refers to the hypothetical period of time it may take for the anticipated cash flow to appear. This is also the calculated schedule of time that is considered to be the “safe period” before additional capital may be needed. Typically, it will take an average of one year or more for any new business to see revenue; therefore, it is important for the entrepreneur to consider all possible expenses before determining this amount.
7. What is my stake in the company and my ROI?
Since every prospective angel investor wants to have an idea of their percentage stake in a company, as well as their rate of return, it is crucial that this figure be presented and negotiated. Often times, angel investors expect a certain percentage of ownership in a company with a large return on investment because of the risk associated with the fate of new businesses. The entrepreneur should be aware of such demands and be prepared to present such values.
8. What will happen next if the company fails?
Angel investors are known for their risky business deals and often have a well-planned exit strategy for each of their investments. There is always the possibility their invested company may not be as successful as anticipated; therefore, they usually prepare a strategic plan in their agreement. They may choose to exit the company after a certain period of time through IPO, merger, acquisition, or sell-out. The entrepreneur can even offer their angel investor some protection by providing a secured position on assets and subordinating the equity in case future liquidation occurs.