How to pitch to Angel Investors
By Chandu Nair
Entrepreneur & Advisor
Angel investors can be current or former entrepreneurs, business leaders, family business folks or successful people in their own fields with one key thing in common – a high net worth with a penchant for investing in new businesses helmed by hopefully savvy entrepreneurs.
They tend to operate either alone, as individuals, or as groups (syndicates or networks of some kind). In India, networks can be those like Indian Angel Network (IAN), The Chennai Angels (TCA), Mumbai Angels and so on.
India has a distinct shortage of Angels; the total number will barely exceed a few thousand. The largest network IAN had 450 members in 2017 and at best, likely has double that number. TCA has 120 while Mumbai Angels may have around 300.
In 2016, the USA had over 300,000 investors. (Why the Rise in Female Angel Investors Is Good News for Women-Led Start-ups (entrepreneur.com). In 2017, Europe had over 330,000 investors.
So, when you do get to meet an angel investor or early-stage fund in India, it’s good to be prepared so that you make the best use of such an occasion.
The key thing is really to understand the nature of the beast. Individual investors are often quite different from say, networks or family offices and early-stage seed funds.
For example, in a network like The Chennai Angels, the process is more formalised than with individual investors. There may be a few calls, meetings and pitches with different sub groups depending on the extent of interest shown.
Due diligence too will be thorough. The advantage – networks are more likely than individual investors to lead your round of funding and tend to have better access to higher levels of funding either on their own or through their partnerships with other networks, funds and platforms.
Next is to get a better fix on the mind of the investor. This is where logic meets emotion. You need to convince them logically while simultaneously your passion and zeal shines through impacting them emotionally. It is when the twain of idea plus individual meet that investment happens.
On the mind side, explain clearly the nature of the problem you are solving, how unique your solution is or how you are making money from customers.
On the heart side, use the power of storytelling to wow them with your enthusiasm and verve, that you are going to make it happen with or without them, so much so that they are rooting for you and want to be part of your journey.
Investors typically would like answers to question such as
1. What problem are you trying to solve? Why is it a problem and for whom?
2. How is it being solved now and how different is your solution/offering?
3. How big is the problem? Market size and potential
4. How will you make money off it?
5. Why are you the best person to solve it?
While a good pitch deck/B plan with a well-defined go to market strategy is great, what investors try to figure out is how the entrepreneur is – ‘Can I do business with this guy/gal?’ is the key question exercising their minds. How they feel about you can determine whether they go ahead with the investment or not.
Based on the assessment of the individual and the idea, investors judge if they can make money along with the entrepreneur. Basically, a judgement on two critical aspects – return of capital (protection of investment) and return on capital.
Key things to note
1. Practise, practise, practise – as the Boy Scouts motto goes, ‘Be Prepared.’
2. Show rather than tell – make your product the hero
3. Watch what you say – it’s the off the cuff statements that can make or mar you, often the latter
4. Body language counts – especially during in person pitches
5. Show how you are going to make money, and make them money as well
6. A good pitch results often in a next meeting so tenacious follow up is key
Please remember – angel investors are fully aware that they are investing in possibly the riskiest of investments.
Therefore, the more you show how mindful you are of their money and project yourself as a trustee than a beneficiary, the better your chances are in swinging that investment.