Angel investors are typically high-net worth individuals with business and/or entrepreneurial experience. They provide capital or initial seed funding for start-ups that meet their criteria in exchange for an equity stake in the business – usually between 10% to 40%. They would typically expect a return on investment within a 3 – 5-year period.
Angels generally look for tech start-ups with high potential for growth in sectors where they have some expertise or a particular interest. As well as business acumen, angels can provide contacts, networks and access to other investors. Their input may vary, but it is usually hands-on, and may involve a seat on the board.
The preparation – To be ready for an angel investor, a start-up should have achieved some traction, have an MVP (minimum viable product), run a successful trial, made some sales and/or received positive feedback from users or customers.
The relationship between the founder/management team and the investor is crucial, and both sides need to be confident that they can work together. Founders should consider the investor’s background and experience and find someone with the right fit to help them grow their business. Check out angel networks to find investors, e.g. Melbourne Angels and the Australian Investment Network
Angels look for a founder/management team with the experience, skills and capabilities to deliver on the vision and execute the business plan. The business plan should tick all the boxes in clearly outlining the problem, solution, the financials, IP, projected growth, marketing, risk mitigation strategies, etc. and include the exit strategy. Ensure all the key points are in the executive summary.
The pitch deck is vital. It is the key to attracting an investor, and if isn’t compelling and doesn’t tell a story, no-one will bother to look at the business plan. Pitch decks should be succinct (10 – 12 slides) include images and convey the key points of the opportunity – what it is, why, when and how it will be executed, the key financials, the team’s relevant skills, and why it is worthy of investment.
Need other help to get your new idea to market and advice on grants? Contact INNOVIC or call us on 0402 305 118.
