How to Hook an Angel
By Russ Holdstein
Even in a tumultuous economic environment, there are still tried and true methods to selling your business idea to a potential investor.
In this unprecedented economic environment, how can your business put together a dynamite proposal that will have investors lining up? Well, perhaps we should say, that will have one investor anyway. They may be scarce right now.
Recently, a successful entrepreneur asked me to help him leverage his bricks and mortar business onto the web. He has a very successful, multi-location retail business that he and has partner have built up over a number of years. He has already made a significant investment in developing an attractive web site and has a good volume of e-commerce flowing. But more needs to be done to vault this site onto the most popular lists and make it a real winner.
If I’m going to invest my time and my money, I need to have a good feeling for how likely it is that this business will be a big hit. So I did a little homework and came up with a list of what I need to know before I can invest in this (or most any other) deal.
If you can answer these questions in a way that puts a sparkle in my eye, I’m an investor. Fail to come up with at least a few great answers, and I’m gone. In order of importance (to me, at least) answer these questions in the right way and you too can hook an angel:
- What have you done in the past that makes me believe you can really pull this off?
- Who are the smart people you are working with to make this happen?
- Who else is investing (or has invested in the past)?
- How will your idea become a profitable business (what’s your business plan)?
- How big do you think your company can become? How long will it take?
- What stands in your way of becoming that profitable business (product development, competition, management team development, etc.)?
- What resources are required to get your company from where it is now to where you want it to be?
- Beyond money, how can I add value to your venture?
- What is the structure of the investment? How much do you believe your company is worth right now?
- How do I get my money out? How long will it take?
You will notice that the top three questions deal with people. I always invest with smart people in whom I have confidence. Without good people, I don’t care how good the business idea is.
Once you’ve explained your business model, I want to get inside your head. What do you consider success and how will you achieve it? How are you going to make it come together in just the right way? Are you being realistic about how difficult it will be to succeed?
You can use these questions as the basis for a proposal that’s about 10-20 pages long. Make your proposition irresistible and you’ll be able to hook your own angel!