Growth5 Blog

Wednesday, May 13, 2009

Don't Forget About the Angel Investors

This article from the May issue of Entrepreneur is a good reminder to consider Angel Investors when raising money. Sometimes entrepreneurs get it in their head that they are either too early or too late to pursue Angel Investors. Or, in this economic downturn, they think Angels aren't as interested in investing. Which I haven't found to be true, they're just more selective. So what, tell a great story.

I would recommend letting the Angels decide if your startup is at the right stage for them. Like Wayne Gretzky said, "You miss 100% of the shots you never take." Seek out Angel groups, pitch to them. If for nothing else, it's great practice, and who knows you might find the right Angel at the right time.

Here are some highlights from the article:
1. Resilience is rewarded. Dealing with rejection is nothing new for most entrepreneurs. When I raised money from angel investors in the last recession, I was turned down twice as often as I was encouraged to have a second meeting with an investor.

2. Persistence is rewarded. It’s also important to have a systematic approach for dealing with investor objections. For example, the most common form of objection in today’s market environment is some variation of “I don’t want to liquidate my stock market investments to invest in something new,” or, “This is not a good time for me to make investments.” A good response would be, “Are you convinced each of your stock market investments will outperform an investment in my startup?”

3. Patience is rewarded. Building your investor pipeline over several months is critical to raising money under these conditions. Many entrepreneurs don’t like to raise money, and they don’t think about it like prospecting for new clients. The truth is that it’s very similar. You need to make a prospect list, manage it with a contact management database and send periodic updates to investors to deepen the relationship over a period of months. It takes time to raise money, and entrepreneurs are usually in a rush.
If you are looking for Angel Groups, Angelsoft is a great place to start. From their site: "Since 2004, Angelsoft has been building tools to help Startups and Investors communicate more effectively. Today, 449 Angel Groups and VCs, 17,270 Angel Investors, and 3,500 new Entrepreneurs a month use our tools to take the first step toward building the best new companies of the 21st Century."

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