Securing angel investment is a process fraught with potential pitfalls; founders must approach this venture with a clear understanding of the common mistakes that can deter potential investors.
As a founder, your mission should be to ensure your company stands out for all the right reasons. Here are the most significant blunders I have seen founders make when trying to raise funds and some suggestions on how to sidestep them:
1. Lack of a Clear and Compelling Value Proposition
Spend time refining your value proposition until it’s sharp, concise, and persuasive. Question it ‘to the void’ using people other than yourself. It should address an apparent problem, explain how your solution is uniquely equipped to solve it and outline the market opportunity.
2. Not Knowing Your Numbers
Familiarise yourself with your financials inside and out. Be ready to discuss your burn rate, revenue projections, customer acquisition costs, and the key metrics relevant to your industry.
3. Misunderstanding the Angel's Perspective
Demonstrate self-awareness and maturity by acknowledging potential risks and showing you have considered ways to mitigate them. Show your commitment and passion for your business but temper it with realism and an understanding of the challenges ahead. Remember, Angels are looking to manage risk; they need to be shown that you understand this.
4. Overvaluing Your Start-Up
Industry comparisons, financial projections, and a clear growth strategy should support your valuation. If you need more clarification, consider seeking advice from a mentor or industry expert.
5. Failing to Build Relationships
From the outset, focus on building solid relationships with potential investors. Regular, clear, and respectful communication is critical. Be honest, be yourself, and demonstrate integrity in all interactions. Then, research the angels you will pitch to using all means available.
