Are You Ready for an Angel?
Have you ever wondered what angel investors looked for when they invest in a startup company? Have you ever watched the television show Shark Tank while banging away on your lap top working on your side hustle or your new business and thought, “I could be one of those companies that get an angel to help take my start-up to the next level?”
I recently was lucky enough to attend a presentation by an angle investor here in Atlanta who focuses on tech startups but in our discussion he revealed and confirmed a few things for me that every new business needs to have to not only attract investors but grow successfully.
Even if you are not looking for investors these tips will help to strengthen your growing business and put you on a solid foundation.
1) A team is better than an individual. Angels like to see that a strong team is in place to support the startup. As the startup starts to grow and develop, a single individual cannot do everything. Those entrepreneurs who try to manage all the tasks of a business often fall into the trap of the super hero syndrome and eventually the business will stall out and fail.
2) $10,000 per month in revenue. Angels are looking for startups that have proved their concept and are acquiring customers. Generally, these early stage investors are looking to invest in companies that have reached about $10,000 in monthly revenues. Is the $10,000 per month a hard fast rule? No, but it is a good target that signals that you are able to sell and that the market is interested in your product or service.
3) This is a long-term relationship. Investors at this early stage are generally wanting to invest in a company and try to exit within a three to five-year window. The reality is that your relationship with an angel is going to last closer to ten years or longer. Just as these early investors are looking to see if you and your company are a good fit for them. As a founder or member of the founding team, you need to make sure that you are comfortable with the angel or angel group.
4) Bootstrap as much as you can on your own. The more you and your team can bootstrap the business on your own, the more you will learn and the less of your business you will have to give up. By bootstrapping your business, you and your team will learn how to both focus on important concepts like profitability, retained earnings and being smart in which equipment you reinvest profits into for future growth. While it might not seem as sexy as having investors, bootstrapping is how many successful businesses grow and develop.
Coach’s Wrap Up
It may seem that all that a person or a team needs is a great idea in order to jump in front of an angel investor and walk away with a deal. However, there is a lot more ground work that needs to be laid before approaching an angel investor. While this blog does not lay out a complete checklist of what a smart startup should have in place before approaching investors it does highlight some of the items that angels look for from a company they are thinking of investing in.
If you are in a startup, is your team solid? What are your monthly revenues? Are you ready to give up 25-35% of your business to take on an investor?