5 essential factors to attract angel investments – TechCrunch
In addition to two decades as an angel investor and startup scout, I’ve met hundreds of entrepreneurs seeking funding and attended an equal number of slide presentations.
You could say I’ve seen it all. From my perspective as an angel investor and former entrepreneur, here are five critical factors I look for when considering my next investment.
Offer a game changer that stands out
To attract the right angel investor, be sure to pitch a compelling technology or product offering that solves a critical customer problem. Be sure to showcase your unique competitive advantage – incremental improvement over the competition is not a winning formula for attracting investment.
Include key market metrics such as TAM, SAM, and SOM. TAM (Total Addressable Market) is the total revenue possible if a product or service were to achieve 100% market share. TAM answers the question of who would theoretically buy your product or service. It describes the total revenue that a company could earn if it held an overall monopoly with full market share for its product or service.
The TAM for the soft drinks category, among the many categories I invest in, takes into account the entire global soft drinks market, looks at all revenue from beverage purchases, imagines sales in all countries of the world and assumes no competition except tap water. SAM (Service Addressable Market) is the geographically scoped TAM segment that you can target with your products or services. Finally, SOM would be the market share that a company could capture over time.
Present strong finances
When pitching to angels, it is essential to show proof of concept, traction in regards to product/service development and revenue. Knowing your company’s financial situation and presenting your numbers to investors is paramount, as is ensuring that the past and current numbers you present are accurate.
Investors want to see revenue, gross margin, and net profit margin. Don’t be tempted to exaggerate or hide trouble spots; it’s a huge red flag that investors will see through, dashing your investment prospects.
Founders tend to assign a much higher valuation to their company in a good economy. To resist to the temptation! Marjorie Radlo-Zandi
Case in point: Two venture capitalists recently pulled out of an investment in a game-changing SaaS company because the founder drastically inflated the finances and misrepresented the product development stage.
Have a realistic five-year projection that includes profit and loss – a mid-level projection that’s neither overly optimistic nor overly conservative is best. These financial projections give investors insight into the future of your company’s sales, cost of goods, operating expenses, and net income. They become a collection of estimates and forecasts that provide a data-backed view of your company’s financial future.