Apply this angel's advice, and you'll never hear "no" again.
By Carolyn Abate (Contributing Writer, Women 2.0)
So you’ve nailed down your idea, built a prototype, and given it a thorough test run. Now is the time to focus on securing investments from outside friends and family. Angel funding is a crucial step in the investment timeline of your company, as you work toward venture capital funding — the ultimate goal for all tech entrepreneurs.
Sources can be a group of people, or an individual that provide one time seed money or ongoing support. This category of investors is generally interested in the probability of a tech start up, and usually bestow anywhere from $2,500 to $25,000. In return, your company gets finances for continued development, plus guidance and mentoring.
While angel investors focus on the early stages of a tech business, they still demand a thorough pitch that addresses forecasting, scalability, profit and other key metrics before agreeing to a deal. As an entrepreneur, it is equally important to conduct a proper vetting of any potential investor before you decide to make a presentation.
“There are a lot of things to take into account,” Valentina Vitols, a Pipeline Fellow Angel Investor, says. “Make sure you know your audience.”
Seek out those investors that make the most sense. Take a look at a potential investors’ history. Do you see similarities between previous tech investments and your product? Does the investment group focus in your area of business? B2B, social media, retail, whatever that may be, consider the group’s portfolio before you commit.
Early on in the funding process, it’s easy to get caught up in the belief that any opportunity to pitch is a good idea, “because you just never know,” Vitols says. But that is a misguided line of thinking for a tech entrepreneur, and a judgment call that would not go unnoticed by potential investors.
“That would tell me that this person is not doing their homework,” she says. Vitols adds that the amount of work required for a pitch is daunting — weeks, sometimes months of prep — and would be a waste of time if the compatibility isn’t readily obvious.
She speaks from experience. Last year, Vitols was on the hunt for investors herself. She is also the founder of Gratitude Interactive, a social media company that launched the app, Love to Thank, which lets members send and receive messages of gratitude.
Vitols came across an investment group in her home town of Seattle that was seeking pitches. She spent about three days preparing her applications and a creating a compelling presentation. But in the end, her time and effort did not deliver the results she wanted. The Love to Thank app was not selected for funding and the experience left her devastated.
After a few days of respite, Vitols licked her wounds and took another look at the list of candidates that were selected for funding. Then it all made sense.
“It was all B2B startups,” she says. “It had nothing to do with my company. They never would have invested in me because they didn’t invest in consumer products.”
There are hundreds -- if not thousands -- of angel investors waiting for you to tap into their funds. So go ahead, conduct that blanket search. But when it comes time to submitting your pitch application, tuck that mentality away. A more tailored and thoroughly approach gives you a better chance to secure the funding you want -- and need.
Have you raised angel funding? What's your best piece of advice?
About the author: Carolyn Abate is a San Francisco-based freelance editor and writer. She’s covered everything from local protests to national sports events. Lately, she’s been writing stories about unique and interesting women who work in the tech industry.