You have a startup, or an idea for a startup, or a cousin with an idea for a startup. But you don’t have extra money to fund it. Nor do you have a ton of time if you want to keep your current job and the lights on.
You want to know how to pitch your startup to angel investors. It just so happens that Marcus Filipovich answered that question at General Assembly last month. Filipovich, a Pasadena Angel, has been involved in raising approximately $10 million in capital for startups, by his estimate; he has also invested six figures across a variety of startups that spark his interest. He knows how the game that is startup fundraising is played.
Part I: It’s all about the fit
It’s more than the money. That’s actually the motto for the Pasadena Angles. For angel investors, especially those that invest early, the investment isn’t solely about ROI—in fact, the return may matter very little to such angles. Many want to get involved and helping the company—and founding team—grow or see your startup as a potential creative outlet. These high net worth individuals not only diversify their portfolios by investing in startups, many also see it as an opportunity to mentor young entrepreneurs.
When you find a flush fellow willing to give you the money you need—or the majority of it; it’s important not to impulsively pocket the cash and sign on the dotted line. You can get into trouble if all your funding comes from one deep-pocketed investor: would you store all your data on one server without a backup? Filipovich speaks from experience–though he didn’t go into details–of starting a company that was heavily funded by a single investor. Filipovich eventually left the company when the investor started getting in the way of operational decisions. “You [founders] need to focus on choosing the right investor. You need to match the startup’s needs with those of the investor,” says Filipovich.
Filipovich also cautions about getting tied down to a newbie investor, who’s by default less familiar with the funding landscape. “Newbie investors want to invest, but don’t know what they’re doing,” he says, admitting when he first joined Pasadena Angels he wanted to “fund everything.” Someone new to the investing game may offer the funds, but they may not provide the connections and access—to startup mentors, lawyers, accountants, realtors and other sources of funding—that a more experienced investor typically offers.
Finding the right angel: what to consider
Deep pockets. Will this investor fund you until you’re ready to raise your Seed round or Series A? If not, where will you get the rest of the money and how supportive will your deep-pocketed angel be in the process?
Large Rolodexes. Who does your angel know? How helpful will they be connecting you to a host of startup service providers? Do they know local lawyers, accountants, realtors that have a proven track record with startups in your industry?
Domain experience. How much does the investor know about your industry? Will they be helpful navigating the landscape and smoothing the road for you based on their extensive knowledge of your particular field?
Their shoes. If you were the investor—think of their background, interest and expertise—would you invest? How does your startup fit with the investor’s interest, expertise and experience—either in other startups or earlier work? How do the startup’s needs align with the investors?
It’s all about closing. “You the CEOs in this room are the key to closing a round of investment,” Filipovich
Stay tuned for Part II: Pitch Angels
- 5 Things Angels Look for in a Startup (nextbigwhat.com)
- How To Get Ready For Angel Investing (inventorspot.com)
- The Great Startup Famine of 2015 (urbanhorizon.wordpress.com)
- High Valuations May Be Bad for Your Business…And Your Ulcer (pehub.com)
- 7 Ways to Get More Women to Invest in Startups (women2.com)
- New Angel Investors Should Ease Into Writing Checks (puretruculence.wordpress.com)
- The Angel Investor’s Ascent [Infographic] (alleywatch.com)
- AngelList Commits to Crowdfunding (blogs.wsj.com)
- Where to Find Funding for Your New Business (businessweek.com)
- A Book in 5 Minutes: What Every Angel Investor Wants You to Know (tech.co)