Thursday March 2, 2017 0 comments
FORT COLLINS #FCSW17 -- Startups looking to tap into angel investment had a chance to hear a primer on the subject Wednesday when Rockies Venture Club, the longest-running angel investment group in America, brought its “Pitch Academy” to Fort Collins Startup Week.
Dave Harris, RVC’s COO, told an audience of startup entrepreneurs they must become educated about angel investment before approaching an angel for money.
That’s because for most angels, investing their money is never done lightly.
“This is a very high-risk investment for an angel,” he said.
Harris outlined a process that startups should consider when seeking angel investment. High on the list is having a concise – 2 to 3-page -- plan that includes an exit strategy, he said.
“An exit strategy is the liquidity event for an investor,” Harris said. “Having an exit strategy in mind and your team aligned with it can help with everything else.”
An exit strategy also helps with nailing down a company’s value, he noted.
“Without an exit strategy, it’s pretty difficult to have a valuation.”
Also important to angels are financial projections, Harris noted.
“They can be a guess early on, but we’re looking for a believable growth rate.”
Angels also want to see a prototype of a startup’s product, Harris said.
“You need to be clear about where you’re at with product development,” he said. “It’s really important.”
Also very important, Harris noted, is to have a promotional strategy that indicates a startup understands their market.
“Your go-to-market strategy is where most companies usually fail,” said Harris, who estimates he considers about 700 pitches each year.
“You could have a rock star team and an amazing product, but if you don’t have a promotional strategy you’re probably not going to get an investment.”
Harris said angels like to see a startup has paying customers, but it’s OK if they don’t. But some kind of public interaction – that validates an interest in the startup’s product or service – is crucial in helping to prove it is investment-worthy.
“It could be downloads, it could be Facebook followers – whatever traction you have you want to include in your (funding) pitch.”
Angels are people, and establishing relationships with them can be the best way to persuade them to take an interest in funding a startup, Harris said.
“Be part of the community,” he said. “Angels love to invest in people they know.
In addition to getting to personally know angel investors, Harris said it’s also a good idea to know their investment preferences.
“Get to know the kinds of things that different angels look for and adjust your (pitch) story for each one,” he said.
When considering a startup investment, Harris said angel investors generally look for such attributes as integrity, passion, experience, knowledge, skills, leadership, vision, commitment and coachability.
Rockies Venture Club has 232 active angel investors and is one of the Top 10 such groups in the nation, Harris said. Over the last two years, RVC helped funnel about $30 million in angel investment to Colorado companies, he said.