I Need an Angel Investor. How Do I Make My Choice?

You are ready to turn your business project into a real venture. You have a certain amount of money from your savings, as well as from family and friends, but you still need more capital to get things going. Bank loans are impossible to obtain at this stage, as the risk of failing is too high, the only alternative you have are private investors.

Am I Eligible?

Angels invest in start-ups with a very promising ROI. Is your business eligible? If you have a very clear vision of the process, you are able to make pertinent financial projections and are also a skilled presenter, capable of persuading prospective business partners to provide you their money, you may be very close to getting funded. But being “very close” does not necessarily mean being “there” and most investors stumble before getting what they want for unsure reasons.

Where Do I Search?

One of the reasons that cause a stressful delay in raising funds is connected to the disorganized manner in which investors are (not) selected and contacted. If you have some acquaintances that could refer you to some angels, and referrals are very appreciated in this case, you may still not obtain the money. It is not that your idea is uninteresting, your business plan needs to be revised or you lack public speaking abilities. The problem is that the selected investors may have no experience in your field and they’d rather not risk putting their money into something they don’t sufficiently understand.

What Are the Selection Criteria?

What you need to do is organize your list of investors, so that they perfectly match your company, considering the following criteria: stage preference (and most angels invest in start-ups, only some of them being also interested in follow-on investments), industry preference, amount of money they usually provide, proven track of success with other funded ventures. The more familiar with your activity sector they are,the more domain knowledge they have, the more benefits you will have regarding management assistance and advice in difficult situations.

The choices you make in the start-up phase will later influence the success rate of your business, so remember to choose wisely and keep the gates open for new rounds of investment.

Funding Sources For Early Stage Companies - Hub Angels

Who Are Hub Angels?

In 2000 the group was an organized club with 15 individuals. Since then, it has evolved to a group of limited partners investing through angel funds. Hub Angels have invested over $12 million in a wide range of sectors, such as biotech, financial services, healthcare and software.

Fund III consists of $3.5M of capital and 35 members and provides capital to seed and early stage companies based in the New England States, with a preference mainly for Series A rounds. As a base investment the fund typically provides $250,000, with an additional amount of $250,000 coming from its Members. Some of the VC firms having co-invested in Hub’s companies include Commonwealth Capital, Intel Capital, and GE Capital. Companies in Hub’s portfolio: Zipcar, Flexplay, Seahorce Bioscience, Intelligent Bio-Systems.

Recent Investment - $1.9 Million in Series A Funding for Copiun

Copiun is a provider of corporate endpoint management solutions , based in Marlborough, Massachusetts. On September 1, 2010 it secured 1.9 million in series A funding from Hub Angels and RRE Ventures and the money will be used to expand customer acquisition and market adoption. Copiun Data Manager 2.0 is the latest version of its corporate solution. The main features that ensure the company high chances of becoming a market leader in this market are native end user experience, object based deduplication and federated search capabilities.

How Can Your Company Benefit From Angel Funds?

If you need capital for your start-up and you cannot obtain a bank loan, angel investors are the best funding alternative. The advantage is that they also provide management advice and expertise, helping you along the difficult business process. What you need is an innovative idea, a good business plan, an executive summary and a skilled presenter, able to convince angels that your business is worth investing, with great ROI perspectives. If you lack contacts that can refer you to business investors, you have the option of using an angel investors directory, that would allow you select the ones suitable for your venture’s development stage, industry and geographic location.

Business Investors - Draper Triangle Ventures

Draper Triangle Ventures is the Midwest-based Network Partner of Draper Fisher Jurvetson. As industry preference – they usually fund high-tech start-up companies with high market potential and, regarding stage preference, they provide seed and early-stage capital. Globally, the DFJ Global Network Partner Funds comprise more than 140 VC professionals, in over 30 US, European, Asian, Israel, Russian and South American cities. There are more than 600 portfolio companies that have been funded and over $6 billion of capital under their management. Here are the most recent investments made this year.

1. ClearCount Medical Solutions

At the end of August 2010 Draper Triangle Ventures Invested $5Million in ClearCount Medical Solutions, a patient safety solutions innovator. The close of series B financing round brings the company funds for research and development, as well as for market penetration. What ClearCount provides are RFID chips to count and track surgical sponges. The benefit for patients is preventing surgeons from leaving sponges within their bodies during intra-abdominal surgical procedures, such quite frequent incidents leading to severe infections. What do the products ensure to hospitals? A better reputation at a rapid rate of ROI.

2. Co-eXprise Inc.

Co-eXprise is a developer of supply chain software, based in Wexford. In February 2010 it raised more than $2 million from Draper Triangle Ventures. It was the first time when the company used funds from an institutional investor. In the past Co-eXprise assisted firms that purchased commodities such as gas and electricity. Later it started to develop software that helps clients find supplier matched for their supply chains. The funds have been used to hire sales and marketing staff that would support Asian and European opportunities, to increase local employment and to push sales.

3. Landslide CRM

Landslide is a a leader in innovative salesforce solutions software. In January 2010 it secured $8 million in growth capital. Draper Triangle Ventures were included in the financing round,among other business investors. The aim was an increase in staff in order to expand its brand and marketing presence in Pittsburgh and Boston. Landslide have expanded their second generation CRM (customer relationship management) product, allowing organizations to define their sales process, combining the sales process with innovative sales performance technology.

International Investors in South Africa

The opportunity to make significant investments in the South African market has been considered by more and more private investors in recent years. With international angels, as well as South African investors, the country has a lot of potential for investments that bring high returns. What were some of the key deals of the past month from which South Africa’s development will benefit?

Rail Pact with China

The agreement signed in August 2010 aims at promoting trade and investment in rail projects and finding new approaches for the consolidation of the transport sector, China being the largest high-speed rail network operator in the world. China is willing to share expertise with South Africa, as it has great specialists in developing and upgrading highland rail, networks and maintainance. Research institutions and private organizations with the technical and financial resources to implement specific projects will be identified and contacted. Another mutual benefit will be the exchange of professionals such as engineers in the field of intelligent transport fields.

Russian Uranium Supply

The agreement signed by Jacob Zuma and Dmitry Medvedev states that South African nuclear power stations will be supplied with uranium starting with 2011. South Africa has been long considered an important investment destination due to its natural resources. Besides uranium, Russia will also provide technological support, also considering the option of building its own plants. This deal represents the first important step in further consolidating and enhancing bilateral relations, as the Russian business delegation members also represented sectors such as engineering, energy, logistics, infrastructures or aerospace.

Some of the advantages, foreign investors are aware of when they decide to put their money into South African projects are the resource-rich region and the tax regime, in line with global tax systems, Entrepreneurs willing to start a new business there and looking for investors should, however, consider the option of first contacting investors in South Africa, to be able to benefit from permanent management assistance, besides business capital.

Three Tips for Pitching Venture Capitalists

The most important thing to start with, before thinking of the pitch, is selecting and contacting the right investors in your venture capital firms and angel investors database. VCs with similar companies in their portfolio and having the same stage preference as the one your business is currently in are likely to be more interested in your business idea and willing to meet you and fund it.

What is an Elevator Pitch?

You have often heard the notion “elevator pitch” or “elevator speech”connected to entrepreneurs presenting their business idea to angel investors or venture capitalists. The name refers to the overview of the product or service you are going to need capital for. The term “elevator” implies delivering the speech in maximum two minutes, that is, the span of an elevator ride.

How Long is the Elevator Ride?

However, one should consider this two-minute duration metaphorical, as this pitch usually lasts about twenty minutes, that is, the maximum period of time suitable for a normal person’s ability to focus, however interesting the presentation may be. So, it is not a hurried presentation of a two-hundred pages business plan. It is meant to capture the attention of the possible investor without being too superficial, but also without becoming a bore.The two things to have in mind when making a written draft of the pitch are the content and the form. Both what you say and how you are going to say will matter.

Be Short, Clear and Confident

Give enough information but use rather short sentences, be careful with your intonation,pauses and body language and don’t forget you are a human in front of other people, not a robot or a talking book. Don’t make a long introduction, the investors should know what you do after hearing your first sentences. Practise delivering your speech to make sure it is smooth, not overwhelmed with technical terminology or PowerPoint slides, revise and update it until you give it the final shape.

Don’t Pitch Your Ideas, Pitch Yourself

What you are supposed to prove is that you have the suitable knowledge, necessary skills, concrete accomplishments and expertise, therefore, tangible concepts, to turn your innovative ideas into a successful business. Lots of start-ups fail not because of the lack of great ideas, but because the leaders and the team do not find the ability to constantly improve, update and put together all the above mentioned features, finding fast solutions to various challenges and problems.

Make Plausible Financial Projections

Proving you are capital efficient may be very difficult for an early stage company, as you do not have the previous experience or any figures showing how you used capital before. Business investors will ask you how much capital you need, what you are going to do with the money and when. The minimum amount that you are going to ask for should be enough to reduce the business risks. Although some VCs may prefer to leave financial projections to further discussions, you should be prepared and be able to focus on your future business income channels.

Don’t forget it is impossible to know everything and have a perfect business plan. Be aware of what you know and of what you don’t know, be transparent, don’t hypothesize, and prove you have a credible team of experts that will help you turn your idea into a functional business. Smart leaders will always surround themselves with even smarter people.