The tables were turned as angel investors pitched to would-be entrepreneurs at an Unlimited Potential function in Wellington last Thursday.
Well over 150 people turned up to hear four speakers – and here’s a selection of comments from angels who are all members of Wellington’s Angel HQ.
• Was in theory to talk about the ‘black art of valuations’ [of a start-up] – to which he gave the short answer “I don’t know”
• Question is…..do you want to do a deal?
• Come up with how much money you need, come up with some financial figures
• Looking for somewhere between 20% and 40% of the business (angel’s investment). Come up with something that’s sensible….a round number that’s plausible for the angel and that you’ll be happy with later….and try to do a deal
• Asked the question (of himself) or why he is in angel investing. Interested in testing the limits of an idea….possibilities.
• As angel investor can help close the financial gap
• It isn’t about the future projections of cash, is about how fast the entrepreneur is going to burn through that capital. What costs have to be met to achieve what is needed….get hard numbers.
• Sense of realism
• Many people when giving the ‘elevator pitch or barbeque pitch’ start with the what, then how, then why. Reverse that. Instead start with the why (a product service etc will work/is needed), then how, and followed by what.
What makes an investible entrepreneur
• Driven, committed, capable + coachable and engaging
• Angel investment is like getting married….will be good times and tough times, need to manage this
• Know your market and how you’re going to make lots of money
• Most angels want to see you be as flash as you can be
• Need a great team around you. Convince others that your idea is good, even in the face of skepticism
• Don’t make any commitments you can’t meet
• Be scrupulously honest in everything you do……angels will examine your trail of relationships….any dishonesty, angels will walk away
• Be realistic about the valuation of a start-up….angels want to get a deal done….go low, err on the side of being too low
• Have an exit plan
• Like to see plans that can turn into a $100 million company…means has to play to international scale rapidly, have a big, addressable international market (which isn’t just Australia!)
• Needs to be barriers to existing competitors
• Preferable to have some ‘secret sauce’
• Requires founder who is enthusiastic, persistent and totally committed to what they’re doing
• Proof = early customers
• Have a team in place. Shows that can work with others. Relationship is a two-way thing with the angel investor
• Pluses = when other peoples’ money on the table, ‘space’ that’s heating up, not the first time that doing something like a start-up
• Is better is have some outstanding personal characteristic. Anything excellent in life that you’ve achieved, something that you know a lot about.
• Focus on making money by generating value….not in some corporate structure, tax advantages
• If you have an uncomplicated capital structure, is much preferable
General answers to questions from the audience
• There is no such thing as a typical scenario for an angel investor
• Shorter, faster, harder in meeting milestones shows that people will be more successful
• Angel investment is only the start of the investment story….as founders, you’re probably going to get valued down.
• ‘Would you rather have a large part of the hind quarter of a cattle beast, or the whole ant’
• Around confidentiality. Angels’ reputation is important to them too.
• Ideas are meaningless. What is important is the management team, market, capability