Bill Payne has been enabling entrepreneurs through Angel Investing since before it was cool.

Six Days to Success - Securing Angel Capital - Day 6

We have all heard stories about investors, upon observing the explanation of a business plan as defined on the back of an envelope, immediately wrote checks.  Sorry, dreamer… that ain’t gonna happen!

Perseverance, knowledge and patience are required by entrepreneurs seeking angel investment in their startup companies.

• Due diligence, the process investors use to validate the plan and the opportunity, usually takes 2-3 months.  Angels are part-time investors and don’t necessarily work at the same pace as entrepreneurs.  They are investing their hard-earned savings and want to assure the plan will lead towards a successful exit.

What can you do to expedite the process? 

• Be ready to respond quickly to requests for information from investors.
• Provide complete answers to inquiries from investors.  Anticipate follow-up questions and provide that information with the first request.  Cycles of questions simply waste time.  Don’t expect investors to make a complete list the first time.
• Be completely honest with investors.  Give complete and truthful answers to every question.

• The terms and conditions of early stage investing are a foreign language to those new to starting companies.  To negotiate reasonable terms with investors, entrepreneurs need to understand these terms but also to understand standard practice in their business vertical and in their geographic region.

What can you do to be prepared for these negotiations?

• The best place to learn about investing terms is from the National Venture Capital Association website at www.nvca.org.  Look for the standard term sheet under Industry Practices.  Not only are the definitions complete; they offer examples of terms that are company-friendly, investor-friendly and neutral.
• After studying the NVCA standard terms, speak with your advisors and your attorney (who must have lots of experience in started investor-ready companies).  Verify the best practices in business sector and locale.

• Be persistent yet patient with investors.  It is difficult to chase investors without seeming pushy.  Angels recognize that each round of investment must be closed before the entrepreneur can begin to execute on the plan.  But angels are not full-time investors. 

What can entrepreneurs do to expeditiously close a round of investment?

• Make friendly follow-up calls to investors, asking if you can provide any additional information to assist in their investing decision.
• During these calls, ask if the investor is ready to make a decision.
• If not, seek permission to follow-up by phone or meeting and attempt to set a date for the next discussion. 
• Close the “low hanging fruit” and use those investors as leverage to close others. 
• Do a bit of due diligence on your investors pool.  Be ready to walk away from those who have demonstrated a pattern of not ever investing.  However, stay with those who are cautious investors.  Patience will win the day with them.

I wish you big-time success with securing your needed capital. I solemnly promise excellent value and a tremendous range of clever tricks and shortcuts for squeezing the most amount of capital out of investors.
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Sincerely,

Bill Payne

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