Ideas come a dime a dozen; how you materialise them into a functional business is the million dollar question that haunts most aspiring entrepreneurs. In a digitally-empowered and financially-challenging world, everyone has a voice and the tools to make it heard. Unfortunately, this evolution has also proved to be a double-edged sword for entrepreneurs because it has massively strengthened the “talk is cheap” resolve of investors.
Capital is what makes and breaks ventures and if the investors you pitch to sniff out even a few minor holes in your business model, it’s safe to say that you can kiss your funding dreams goodbye.
While some SME entrepreneurs traditionally seek out business loans and the unconventional, yet effective method of crowdfunding to meet their financial expectations, there are many who would rather pitch to angel investors. The nature of the job of ‘angel investors’ complements their name as these individuals invest in the entrepreneurial ventures they see potential in so they can execute the next stage of their business plan smoothly.
In return for this investment, they seek an equity share of the company, so they can vastly multiply the value of their portfolio when the business becomes successful.
Apart from that, angel investors with experience in the relevant industry an entrepreneur is aiming to pitch in, bring to the table their invaluable experience to help provide strategic guidance to the company they are funding.
Thanks to a vibrant startup culture, Singapore is one of the few countries shaping up to be the San Francisco of the East. A recent NUS research revealed the number of local angel investors to be 165, which is steadily growing. The retail, hospitality and business service sectors have seen the largest share of angel investment in Singapore. Individual angel investors usually raise an amount ranging between S$25,000 (US$19,800) to S$100,000 (US$79,200); however, angel groups can pool in larger amounts that range from S$300,000 (US$237,650) to S$750,000 (US$594,100).
The 4 T’s to get pitch perfect
Technical proficiency and management experience are two of the key skills angel investors scan for in your CV to determine if you have the chops to walk the talk or if you are yet another starry-eyed entrepreneur with get-rich-quick dreams. Investors who are impressed with what you’ve already achieved are a lot more likely to show interest in what you want to achieve.
Valuation models are low priority for investors. If the ideas and the team running the business is professionally inexperienced to pursue the vision they present, then the investors can’t trust them with their money. Hence, it is important to have the right team members on board to promote the business model. For example, a solid software tech startup is one that has at least one member who is a coding juggernaut and another member that is great at business networking and marketing.
Without a functional or semi-functional prototype of the product you are pitching to an angel investor, your business model is nothing more than a sketchy hypothesis in their mind. Singaporean startup platforms like JIT Electronics would have never progressed to the next level if they failed to exhibit a satisfactory prototype of their products to their investors.
Transparency and vision are the best friends of an angel investor that help remarkably quell their investment fears in your venture. A detailed and accurate report of your organisation’s financial liabilities, customer surveys, sales, or any variables that can help gauge the investment risk in your venture will gain instant goodwill for your business in their book.
Angel investors often target successfully crowdfunded companies that require more capital because their products and services have already earned a stamp of approval from the consumer market.
Lastly, angel investors always prefer entrepreneurs that have a clear-cut niche product that can appeal to a large section of the consumer market. Entrepreneurial ambition needs to be married to reality in order to lay the foundation for a great target pitch.
Secondly, you can also conduct your own research on the angel investors you are pitching to in order to identify the background they are from and what piques their interests. Each angel investor has a proclivity towards investing in a particular sector over the others and if your business pitch aligns with their preferences, then you have a lot more chances of seeing a lot of dollar signs come your way.
The author is Country Manager (Singapore) of imoney.sg
The views expressed here are of the author, and e27 may not necessarily subscribe to them
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