Is Your Company Angel Investment Ready?

Congratulations, you’ve decided to start your own company! You have a product in the market and are beginning to generate revenues: But now, you face a critical challenge: How to secure the funding you need to turn your vision into a reality? How do you take the next step in “scaling your business”. In many cases, angel investors can provide that crucial financial boost your company needs.

But is your company ready for angel investment? Understanding angel investor ROI expectations, the angel investment process, and how you can demonstrate your company’s readiness for investment will be critical to your future success. This post is the first in a series designed to introduce you to the world of angel investing, offering insights and tips on how to prepare for a successful angel investment outcome.

Angel Investor ROI Expectations: What Do They Want in Your Startup?

Angel investors may be wealthy individuals or groups who invest in early-stage companies in exchange for ownership equity or convertible debt. They usually provide funding during the early stages of a company’s growth. However, their financial support does not come without expectations. Here are a few things angel investors will want to see in your company before they consider investing:

1. An Attractive Value Proposition: Angel investors want to see that your company’s product(s) or service(s) has the potential to grow exponentially. Your product need not necessarily be groundbreaking in nature, but you should at a minimum be able to articulate how it will enable you to capture a large share of a defined target market in a short period of time. “Why will customers purchase your product” and “Why is your product better than similar ones offered by entrenched or newly emerging competitors” are questions you should anticipate being asked by any potential angel investor.
2. A Proven Product: Investing in an early-stage company with a proven product, existing customers, and, ideally, profitable revenues, is attractive to angel investors. To secure investment, angel investors will want to see that there’s genuine interest in your product, and that the market is ready for it. In other words, you should be able to show them that your product offering has traction in the market. If your product is only at the proof-of-concept phase, you may want to consider seeking funding from “Friends and Family” investors to get it completed and launched in the market.
3. A Strong, Committed Team: Angel investors look for a team with diverse skill sets, industry experience, and passion for their mission. Remember, a great idea can only go so far without the right people driving it forward.
4. A Viable Revenue Model: While your startup may not be turning a significant profit yet, a clear path to generating profitable revenue is crucial for attracting angel investors. Be prepared to show how your business model will scale over time and offer angel investors a solid return on investment (ROI) – A 5X to 10X ROI over a two to three-year period is considered an attractive return for angel investors.

Demonstrating Your Readiness for Angel Investment

The first step in your journey towards securing angel investment is presenting your company in the best possible light. One way to do so, is by leveraging automated “angel investment readiness” decision support tools to help you streamline the process while also providing you with useful insights, guidance, and recommendations to help you make a strong case for your company’s potential.

Automated decision support tools like the DCArchAngels’ “Entrepreneur Growth and Readiness Assessment” (EAGR) – developed on Lusynt’s award-winning iDMX technology platform – can help you evaluate your company’s current readiness for angel investment as well as help you understand where improvements can and must be made – thereby increasing your chances of attracting angel investment.

Some of the key features of the EAGR decision support tool, for example, include:

• Decision Analytics: Get a clear understanding of your early-stage company’s strengths and weaknesses with a comprehensive analysis of your business as well as dynamically generated insights, guidance, and recommendations on how you can better position yourself for angel investment.
• ROI Modeling: Prove your future potential by providing a detailed roadmap of the ROI your startup can offer to angel investors.
• Investment Readiness Dashboard: Track your progress in real-time and know exactly where your startup stands in terms of investment readiness.

Final Thoughts

Attracting angel investment isn’t an overnight process—it requires thorough preparation and a deep understanding of the angel investor process, their ROI expectations, and how you should best position yourself in their eyes. To learn more, please contact us to discuss how we might be able to help you become more attractive to angel investors.