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Startups, Entrepreneurs, be better informed before you 'Pitch it'!
Curated by Marc Kneepkens
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How To Negotiate Successfully With Angel Investors

How To Negotiate Successfully With Angel Investors | Pitch it! | Scoop.it

1. Understand the Nature of Angel Investment

Angel investing is particularly associated with Silicon Valley, but this practice is used all over the world. Angel investors are often already successful entrepreneurs, but they may be anyone with money to invest in a startup. In return for the funds that the investor provides, the angel gets a pre-specified share of the business, in effect owning a percentage of your company.

 

Most angel investors then sell this stake in the business in the future for a profit. However, if the business fails, they don’t get anything in return. Because of the high-risk nature of an angel investment, some investors prefer to take a highly hands on role within the company. They also will need to see proof of your startup’s growth prospects before beginning negotiation.

 

2. Nurture Existing Leads

Treat relationships with potential investors as you would those with any other business leads. If there are any individuals who have shown interest in your company, follow up with them at least once a month to update them on your progress. This way, they’ll feel that they won’t be jumping into an unknown investment.

 

3. Track Results From Day One

Angel investors are interested in measurable results. To attract attention, keep track of all of your data from the get-go. No matter how small your business may be, spend time recording leads, profit, and website traffic. This provides proof of the progress you’ve made from day one.

 

4. Look Beyond Money When Evaluating Investor Value

Naturally, angel investment is attractive to entrepreneurs in need of startup cash. However, it also provides the opportunity for other benefits. Many investors are experienced entrepreneurs who have already learned valuable lessons through trial and error. If they have a financial stake in your company, they will most certainly wish to impart their wisdom to ensure its success. Look at the experience and networking potential of an investor as well as his or her net worth.

 

5. Have a Two-Way Conversation

You will undoubtedly put a great deal of time into refining your pitch for investors, but don’t forget that you’ll be entering a business relationship that’s ideally mutually beneficial. Don’t be afraid to ask questions of the investor during your negotiations. Find out more information about the individual’s investment history, resources, industry experience, and expectations. Follow up with references from past beneficiaries and consider all points carefully.

 

An overbearing or shady investor can often be dealt with in the same way that you would deal with a difficult boss, but there’s more at stake in this case. It may be impossible to separate yourself from a difficult investor in the future, so take care to do your research before you enter into any contract.

 

6. Follow Up

Don’t give up if a worthy investor has passed on your offer at this time. Continue updating your records and refining your pitch. It may be that you’ll find more interested parties in the future, or perhaps you’ll get a second chance with your pitch. Finding and negotiating with angel investors isn’t easy, but when done successfully, it can become a mutually beneficial, (and hopefully very lucrative) relationship for both sides.


 Get your Free Business Plan Template here: http://bit.ly/1aKy7km


Marc Kneepkens's insight:

It's not just a matter of contacting an investor. It's a process and being professional all the way will make the difference.

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Marc Kneepkens's curator insight, September 24, 2014 10:55 AM

It's all about building relationships. You'll work with an investor for a long time, chose well.

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Why Startup Founders Happily Give Up 90% Of Their Companies

Why Startup Founders Happily Give Up 90% Of Their Companies | Pitch it! | Scoop.it
These days, by the time a tech company goes public, the founders tend to own very little of it. We asked two founders: what gives?

Many people in the tech industry dream of building a startup, making it grow, taking it public, and growing rich along the way.

All of that is perfectly possible, but one thing these dreamers don't always realize is that these days, by the time a tech company goes public, the founders tend to own very little of it.

Often they own less than 10% of their own companies. For instance, among the tech industry's most recent S1 forms, Aaron Levie, founder of Box, will own about 6% after the IPO. Zendesk co-founder and CEO Mikkel Svane will own about 8% after the IPO.

We asked two founders of two hot startups, "What gives?"

To read the full article, click on the title or image.



Get your Free Business Plan Template here: http://bit.ly/1aKy7km


Marc Kneepkens's insight:

Still significant stakes, and key people in the organization get them also.

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