How To Get Angel Investment For Your Startup

Last updated on June 21, 2021 by Hong Zhuang Reading Time:6 min

Do you know

1) Only 0.91% of startups received angel investment in 2020; less than 1 in every 100 startups got funded by angels?

2) Products are not what highly selective angel investors are only seeking?

How can you stand the best chance in this highly selective process?

The entire purpose of this blog is to enable you, regardless of the current condition of your startup, to get angel investment. By the time you finished reading, you will know precisely how to make your startup stand the best chance.

Getting money from an angel investor’s pocket into yours is a battle. The only way you can win is to break the investor’s resistance without fighting.

How can you break the resistance?

Fundraising is a combination of content marketing and sales. You exactly sell trust and confidence to angel investors that you can use their money and help build the next gigantic company.

The principal stages of the angel fundraising process consists of

1. planning
2. initial screening
3. pitching
4. doing due diligence
5. cutting off checks to a startup 

As an intelligent startup founder, you reduce the investor’s resistance in each stage.

Keep reading to learn more, or use the chapter links below to jump ahead.

Planning 

The purpose of planning is to determine

1. Your startup’s unique value proposition stimulates investors’ interest in your startup.
2. Where do you fundraise? 
3. Who are your targeted angel investors?

Your unique value propositions

Investors use five yardsticks to filter startups in the initial screening.

First, why do you need the money?

The purpose of raising angel funding is to accelerate the process from a few tractions to product-market fit or enable startups to bootstrap business. 

Suppose you need money as live support to stay alive, OR you use the money to find traction. In this case, your startup is on the avoiding list of every angel investor. So instead of fundraising, you focus on getting a few paid customers now. 

Second, are your product in their preferred sectors, as shown below?

If not, you are knocking on the wrong door.

Third, does your product have either IP or FDA approval?

They reassure angel investors that you have moats giving your startup competitive advantages over its competitors. If you are still thinking of filing an IP for your product, do it before seeking angel investment. 

Fourthly, does your team have a serial entrepreneur or industry expert or someone with entrepreneurial selling skills?

Given the high startup failure rate, angel investors heavily bet on the reputable jockeys(i.e., founders) – not the horses (i.e., the products) because execution is the key to success. Therefore, they scrutinize founders’ skills and experiences. So, if your answer is no, you need to find people with those skills on your advisory board before seeking angel investment. 

Lastly, do you dream of becoming a unicorn company?

Big dream gives them an excellent reason to take risks. On the other hand, if you have a “make a little, sell a little” mentality, your startup will be uninteresting to angel investors.

Where do you fundraise?

You must calculate how much funding you need. Why? 

First, less than half of companies that raise seed financing can never raise funds again. So, this may be both the first and last chance in funding you will ever receive. 

The rule of thumb is to raise funding to cover 12 to 18 months of your startup expense. It means that you will have enough financing to achieve either product-market fit or bootstrapping.

Secondly, you need to have a clear idea of where you can raise funding, that is, from an individual angel or an angel group. In general, you can get up to $100,000 from an individual while up to $1 million from a group.

Who are your targeted angel investors?

Not all angel investors are created equal. However, since the investors will be with you for a long time, they will eventually become part of your startup and be either your supporters or roadblocks.

How do you determine?

First, it can be challenging for founders to define their ideal investors. One way is to start with what kind of people you don’t like. 

Second, the first-time founders usually think that angel financing is all about money. But an angel investment deal is like killing two birds with one stone. Angels also offer you mentorship, network connection, and a warm introduction to VC in your next round of fundraising. 

So, you list an inventory of what kinds of skills and experience you need from your angel investors.  

Now you are done with your planning. If you are ready to enter the angel fundraising battleground, your next step is to develop your pitch deck.

Pick Deck

Pitch deck gives potential investors a brief overview of your business, including products/services, financial model, business model, and growth traction.

Where is your Pitch Deck used in the angel fundraising?

 1) the initial screening. When you email an angel investor the first time, it is the email attachment for investors to review and decide whether to forgo your startup.

2) When you pitch to an angel group.  

Thus, your pitch deck is the first impression of your startup and can be a matter of life and death for your fundraising.

Here is where you apply content marketing to deliver content that your potential investors need to hear.

What kind of content do you deliver?

• Grabbing your potential investors’ attention 
• Building trust and confidence for your startup 

How to grab your potential investors’ attention? 

You dress to impress; make your pitch deck a professional appearance to capture investors’ eyes.  

First, you create ten Pitch deck slides because Guy Kawasaki , venture-capitalist, found ten is the optimal number for investors.

Secondly, For each slide, apply the 5/5/5 rule to enhance your startup brand and the more polished your pitch deck:  

• No more than five words per line of text
• Five lines of text per slide
• Five text-heavy slides in a row

How to build trust and confidence for your startup?

So, your pitch deck must reassure them by addressing the five most challenging obstacles. 

The first obstacle is your customer. You show what the real-world problem your customers face is and how your product has stood the customers’ test with five slides:

1. customer problem description 
2. your solution (10x advantages, i.e., cheaper or fast)
3. your secret sauce, such as technology or IP
4. how you make money with this product (business model)?
5. how much money you have made and will make in three years (financing)

The second obstacle is how your product will conquer a big market by storm. You use the following three slides:

1. Why there’s a vast market for your product (market size). 
2. Who will you compete(competition)?
3. How will you acquire your customers (Go-to-Market plan)

The fourth obstacle is the team. The team slide is your showcase. You prove why your team including border directors and advisors is precisely the right team to create the next gigantic company and turn the excellent investment opportunity into reality. 

The fifth obstacle is the next milestone. You show angel investors how their money and expertise will help you get there. In this final slide, you list:

1. Current status
2. Next milestone
3. How to get you to the next milestone 

Now your know critical elements in a Pitch deck. 

How do you create your ideal pitch deck?

1. Download this Airbnb template:https://www.slideshare.net/PitchDeckCoach/airbnb-first-pitch-deck-editable 
2. replace the content with your startup’s one appropriately
3. go to CreativeMarket, which has hundreds of PowerPoint templates available for you to “beautify” your deck

You should avoid videos in your Pitch Deck because it is out of investors’ favor.

You also need to make PDF versions of your deck since it will be part of the email you send to angel investors. 

You have your pitch deck now; what else you need? 

Other Fundraising Documents 

Where in the fundraising process do you need them?

1. during due diligence
2. cutting checks to your startup.

There are two types of documents:

1. collateral (due diligence)
2. funding (cutting of check)

Collateral Documents

After you pitched the investors, they decided to do due diligence on your startup before making the final investment decision.

Like the house, you use it as collateral for your mortgage. In angle investment, trust and confidence are your collateral. 

You have established initial trust and confidence up to this point. Now you need to use the following documents to reinforce trust and confidence during due diligence.  

1. Trademark(s) and intellectual property agreements: proving you have the secret sauce.
2. Product document: show how your secret sauce works
3. Customer reference: words from the customers are crucial to convincing angel investors that your product is great
4. Go-to-Market Plan: show how you can acquire customers at a reasonable cost 
5. Your startup organizational chart shows how you have run your startup lean to prevent running out of money.
6. Financial statements: show your finance is in order, reassuring them that you will use their money wisely. 

Funding documents

1. Convertible notes purchase agreement for angel investors
2. Certificate or articles of incorporation: Proves your startup is legitimate 

Pitch presentation

Pitch is all about selling yourself and your startup using your pitch deck and further building trust and confidence by adding meats to

1. your big dream and vision
2. your clear strategies for conquering all obstacles. 

The key is to take your potential investors on a thrilling journey from their world to your dream world.

How to do a great pitch presentation?

Before the presentation, you need to talk to a few members of the group to:

1. understand what they want to hear and their desire for investment 
2. make them your fans so they can support you during the pitch and the post-pitch discussions

When pitching, you apply the technique that Steve Job, the master presenter, used: a compelling and interactive hero story. So here is how it works:

1. Angel investor world: they want to fulfill their investment desires. It could be an impact, or, great investment return, or both.
2. Call to adventure: they decide to look for prospective startups that can satisfy their desires.
3. Departure: This is the point-your pitch. You are initially accepted as your potential investors’ prospective startup because you promise to help. 
4. Journey: you show them how you conquer all obstacles you face and turn their desire into reality.
5. Results: they believe that your startup will fulfill their desires.

Moreover, you need to engage your investors in your hero story.

Useful tips

Pitching investors in Zoom is much more complicated than an in-person one, but you can emotionally connect to your investors using the following tips:

1. When you first introduce yourself, DO NOT launch your PowerPoint presentation OR show a video about your product. Instead, you smile and look at your webcam on your laptop during your introduction. It will let you build a good rapport right from the start.
2. Your opening introduction must stir emotion. Remember that a picture is worth a thousand words. In your introduction, create a mental image of your vision using metaphors.
3. Avoid using jargon to confuse investors.

Your potential investors want to know the future, so if you can persuade them that you are a Prophet, they will invest in your startup.

Conclusion

This blog gives you the secret to winning your fundraising:

1. Applying content marketing and sales to reduce your investors’ resistance in every stage of your fundraising process.
2. Delivering the right information to build trust and confidence in every stage of your fundraising process 

Our mission is to match more ambitious tech startup founders and women entrepreneurs to their ideal investors. I hope this blog has dispelled angel investment myths and helped you get ready for fundraising. If you have any questions, you could reach out to us via email: info@zettasher.com or find out more about our fundraising service at https://zettasher.com/fundraising.php.

Good luck on your fundraising!

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