What do angels want to know?
Angels want to gauge the potential of every business quickly so that they can make sensible investment decisions and not waste the time of entrepreneurs. We typically ask the following questions of every entrepreneur so answering them in your submission is a good idea.
1. What is the business or life problem that you solve?
2. How do you solve this problem (i.e. what is the technical nature of your solution)?
3. Who has this problem (i.e. who are the potential customers)?
4. What is it worth financially to a typical customer if they could solve this problem?
5. How many of these prospective customers are there in Australia? The world?
6. What is the current annual market expenditure to solve these problems in Australia? The world?
7. What alternative solutions are there to these prospects’ problems?
8. What is/are your compelling attribute(s) that will ensure your growth in this segment?
9. How will you reach these prospects and service their needs (i.e. what are the sales and delivery models)?
10. What market successes have you achieved so far (i.e. number of customers, sales revenue, etc.)?
11. How much money do you seek and what proportion of the business will investors end up with?
12. Why do you need the money (i.e. what precisely are you going to spend it on)?
13. How and when will investors reach an exit?
What is an Angel Investor?
Angel investors are individuals who apply a portion of their total investment portfolios to provide emerging, typically high risk, companies with seed and start-up capital through direct, private investments. Their goal is to achieve higher returns than the typical public markets provide. Most angels are active investors – who contribute their time and experience, as well as offer introductions to valuable contacts essential to the company’s success – because they enjoy the thrill of helping entrepreneurs grow their businesses. To maximize the value added, most angels specialize in industries or technologies they understand, and invest only in companies within close geographic proximity.
What is an Angel Group?
Angel investor groups vary in structure, from formal to informal. Formal groups follow strict participation requirements that guide members’ minimum investment activity and event attendance. Some groups pool members’ capital to make investments on the group’s behalf, while others allow individual members to invest in specific deals of interest.
A typical angel group’s investment ranges widely from $50,000 to $500,000 per deal, depending on how many group members are interested in the deal. While no two angel groups operate exactly alike, most angel groups maintain a local, or regional, geographic focus in order to maximize members’ ability to actively engage in the growth of their investments. Angel groups often have web sites that provide directions for business plan submission. After screening business plans for top-quality deals that match the group’s criteria, these groups organize regular meetings for members to hear pitches from companies selected to present. If the group (or members of the group) decides to proceed, interested members commonly collaborate on due diligence and deal negotiation. Based on the group’s structure, investments are either made directly by individual members, or by the group as a whole. Most groups apply standard terms to their investments, with some flexibility to negotiate.
What do you look for in companies?
We invest in companies that offer exceptional opportunities for high returns on investment. This usually implies companies with the potential to achieve high growth, strong market position, and sustainable advantages. We generally invest in companies that we believe have the potential to grow to more than $50 million in annual revenue within five years. This should be in either a developing market, or in an existing market with national scope.
Do we sign NDAs?
Since we receive so many plans our policy is not to sign NDAs (non-disclosure agreements) or confidentiality agreements. Melbourne Angels pride ourselves on our practice of the highest respect and care of the confidentiality of all information received; aiming to treat you as we ourselves wish to be treated. However, you should not forward unprotected proprietary information to us. Read this article for more information.
How long does it take for a company to receive funding from the group?
The group is made up of individuals who are the actual investors and engage in this activity on a part-time basis. The group process and investment discipline deliver a professional assessment of the opportunity for the investors. You should anticipate that it will take 3-6 months from initial application for a deal to close.
That’s too long, I need money now!!
If you are desperate for money then we might be able to assist but, quite honestly, if you are desperate then it raises concerns about your management and governance practices. We encourage all entrepreneurs to approach us at least 3-6 months before they expect to require the funds. In this way we can all take the time required to get to know each other. You will be able to decide if we are the right investors for your business and we will be able to better judge if your venture is the right opportunity for us.
What do angels want to know?