It is important to do your due diligence regarding what size and type of investments they prefer, at what point of development do they typically invest in a company, and other factors that may impact your proposal to the investors. Below are a few tips to remember when preparing your pitch:
Sell yourself. Most investors focus on the people involved just as much, if not more, than the product or service you are providing or the property or business you are acquiring. They want to see that you are prepared, which means you need to be prepared to show your market research, pro-forma financial results, your market due diligence and more.
Pique their interest. If you have done your research regarding the Angel Investors, you should be able to tailor your presentation to meet their interests and abilities. If it is a hardcore group of investors, focus on the projections, financials and exit potential. If the investors are interested in making an impact, focus on the social impact of the investment. Tell stories, give examples and make it interesting.
Financial expectations.Investors are primarily focused on how much money they will make by investing in your business and how quickly they will see a return on their investment. Thus, you must answer questions such as: What is your strategy in terms of revenue streams and margins? When do you project the business will achieve positive cash flow? Why do you believe the business revenue will increase each year? What are your profit and loss projections for each year?
Exit strategy. All investors are interested in how and when you will be able to return their money to them. You should be prepared to let them know your exist strategy and what types of multiples are involved. Most investors like to see a relatively short timeline (3 to 5 years, or less) for their exit.
Remember, the more you prepare and practice your presentation the smoother it will go. Make sure you clearly explain the plan from going from a startup business to having a successful exit, and all the steps in-between. Finally, take time to get to know the investors. Remember, the investors will invest in you, not your idea. If your investors are not clearly accredited investors, make sure to get appropriate representations that they qualify by their net worth or income status, and that the Blue Sky laws of the states in which they reside do not have pre-filing or other restrictive provisions in regard to approaching investors.
If you have any questions about the proposals discussed or would like to discuss your company’s data protection strategies, please contact me or the Scarinci Hollenbeck attorney with whom you work.
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