Looking For Angel Investment? Don’t Do Random!
October 11, 2010 2 Comments
I recently received a message from an enquirer in Linked In, a really nice guy in New York asking if I knew any UK investors who might be interested in investing in his sector. How random is that?
I do empathise with his plight but it does seem a desperate lurch out in any direction in the hope that he might get that lucky investment break. There was a time, when as an entrepreneur, I approached sales and business development with this ‘scattergun’ approach. Yes I did use structure in my campaigns to reach out but in my desperate moments, I would scatter my business seeds absolutely anywhere, ‘just in case.’ This random approach, if seen by my sales target probably consigned me to the realms of the amateur. Not only was it unfocused and proportionately waisted energy but also counter productive to the market place reaction that I was trying to achieve. To use an extreme example, it would be a bit like Apple turning up at my local car boot sale with a wheelbarrow load of PCs they want to off-load at knockdown price. This would affect my perception of that company.
Unfortunately, out of good intention, there is a lot of random activity out there when it comes to founders trying to locate angel investment capital. It’s difficult to criticise people when they are trying their best in the only way they know how but unfortunately, investors tend to have less time for approaches that seem amateurish (first impressions and all that). The problem being, if your are on your first time of looking for investment (discounting the friends and family round that may have given you start-up capital), you have so much to learn and there is very little free stuff out there to teach you. When you do venture out, you find that there’s a dearth of advisors who will claim to merrily lead you into angel investing nirvana but beware, you could be slowly moving dangerously close towards an infested pool of consultants that lurk waiting to pounce on your inexperience.
So, what to do? The so called “pay-to-pitch” networks can for some be an answer but unfortunately, there is a current reaction against (quite understandably) these networks (I touched on the issue of fees a little in my previous blog). The gist of this issue is that start-ups shouldn’t have to pay to sit in front of investors, just to ask for investment. On the face of it, it’s a very valid point. The problem being that two aspects get grouped up together under the activity of these networks, they are 1) investment readiness training and 2) access – to angel bucks. The problem is that in my experience, many of these start-ups need the investment readiness training, which is about far more than just developing your business plan. If you’ve not raised money before, someone somewhere is going to have to get you investor ready and the likelihood is it will cost a few £k to do it. When I was operating in South Wales, I did one for under £1k with Xenos, the business angel network arm of Finance Wales. Where you are in the UK, Business Link should you be able to guide you in local assistance but be wise. Ask others around you who they would rate for such input.
For entrepreneurs/founders who have a good business proposition and are clearly investor ready, then one option is to seek investment yourself. It’s an admirable thing to try and raise your own companies finance, as well as seek input from an external angel investor. In fact I would very much recommend it.
When you are ready to search for investors, don’t spend hours looking for sugar daddies in the Cayman Islands (unless there is a strategic and obvious reason to do so). Geography should be an issue, as most companies would welcome the value of a local investor being close to hand for valuable assistance and input.
It’s all about research too. Scour Linked In, looking at both individuals and groups. One trick I have found is to throw questions into the Linked In groups, making them aware that there is a company looking for investment behind the question. Speak to those who have already successfully been down this path ahead of you. Ask them if they can make any angel introductions for you.
A key aspect to being successful in fund-raising is to get to the right people; everything else is random.
Agree, or not? >>> [always enjoy hearing the thoughts of others, so do leave a comment if you have time].