Fine-Tune Your Business Idea, Then Find the Right Angel
If you’re like other entrepreneurs, you live a life of suspense. You need the help of an angel investor to get your start-up off the ground, and you have no idea how to make it happen. Sometimes you wonder whether it will happen.
But you can turn the effort of finding angel help into a methodical process. To the extent that you do, you put yourself in the best possible position to succeed--and to take control of your own future.
How?
As outlined in this space in recent weeks, there is plenty of angel help to be had in Southern California. In fact the area’s angel investor network is thriving. Although it takes work to tap into that network, the truth is that angel investors need entrepreneurs just as much as entrepreneurs need angels.
The good news, in short, is that angel investors want you to find them. The bad news is that they don’t make it easy to do so. Angels don’t advertise in the Yellow Pages. Even if you had the name and phone number of every angel in Southern California, it would do you no good to cold call them, because you can’t cut short the work it takes to get yourself in front of an angel investor, much less the right angel investor.
Here’s how to go about it:
* First and foremost, polish your business idea until it shines--and then polish it some more. What product or service will you sell? To whom? Why will your customers want to buy it? How will you get them to do so? How much capital do you need to get your business up and running? What will you do with that capital? What kind of return can your investors expect? How will they cash out and when?
* Put your idea in writing in the form of a brief business plan with an executive summary of no more than a page or two. You can find books on the subject in your local library and in any good bookstore. You can also buy software to help you write a business plan, but remember that cookie-cutter software programs produce cookie-cutter business plans. If you buy software, use it to learn the elements of a business plan and then write yours in your own words.
* Set realistic goals for your business, starting with your revenue projections, and outline a reasonable timetable for getting your business up and running. Don’t overstate the case for your idea; angel investors know hype when they see it.
* Think carefully about the management of your start-up, assessing your strengths and weaknesses without flinching. You may have a great idea for a business, but if you don’t have the executive and administrative skills to turn it into a going business, you court disaster. Worse, you won’t get the angel help you need. If you need a chief executive, how will you go about finding him or her? How about a chief operating officer? A chief financial officer? Who will handle technology development? Marketing and sales?
* Network, network, network. Angels tend to invest locally and in businesses they understand. Hence you want to identify the angel investors who operate near you, probing for those with experience in your industry. Go to the smartest professionals you know--your attorney, accountant, banker and business peers--and ask them to critique your business plan and to refer you to angels in your community. If these people don’t have the connections you need, they may know others who do. Don’t be shy; ask for help, and be smart and disciplined in your networking. Angels rely on people in their own networks to bring them deals. You need to find people who can refer you into those networks.
* In addition, check with your local government agencies, many of which sponsor programs to foster small-business formation. Check out the business departments of nearby colleges and universities as well.
* Brace yourself for a good due-diligence scrubbing. Angels invest in early-stage ventures, and they don’t take on those risks blindly. If you have negatives in your background, don’t try to hide them.
* Don’t think your job ends when you find yourself in front of an angel with an open checkbook. For one thing, you want several angels, not just one. For another, you want angels with good connections to take you through at least one round of venture capital financing and beyond to a public offering or a sale. In plain English, this means giving your angels the same due-diligence scrubbing that they give you. It also means prolonging your search until you find the right angels for your business idea.
Don’t give up. It takes a lot of time to tap into the angel network. You will find yourself tempted to give up more than once. Indeed, most people who seek angel financing fail to get it, so you face high odds in your search. But some succeed, and if you discipline yourself and search intelligently, you may find yourself among them.
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Juan Hovey can be reached at (805) 492-7909 or at jhovey@gte.net.
