Before you seek angel financing, examine this list of must-have requirements from Susan Preston, author of Angel Financing for Entrepreneurs and an angel herself:
- A solid potential for return. Angels want to know how your company will make money, when it will turn profitable, and when they can expect a return on their investment. Back up those promises of profitability with financial documents that include an income statement, a balance sheet, and cash flow statements.
- A good plan for the cash. Investors want to make sure their money will be spent wisely. If you’ve founded, say, a consumer product company, show how the money will be used to design, develop and distribute your product. And emphasize your thriftiness: angels don’t want to see their money used for big salaries or fancy office space.
- A winning attitude. Get fired up. Angels want to see passion. They want to see you’re committed to your concept and company and you’ll stay the course when obstacles arise.
- A seasoned team. Angels want to see a strong management team that’s capable, experienced in their industry and, more important, open to suggestions and opinions. “If I don’t think that a CEO or founder is coachable, I won’t invest,” Preston says.
- A competitive edge. An angel will want to know that you can capture market share quickly and beat out competitors as you ramp up. If your product or service is fairly unique, an angel will want to see you’ve secured patents, copyrights, or trademarks to protect your IP.
- A well-defined exit strategy. Investors will want to know exactly how you plan to make them money. Just saying “IPO” or “acquisition” might not be enough. Learn how other companies in your industry have returned profits to investors and identify potential suitors for your business.
Source: The Wall Street Journal