Posts Tagged ‘angel_investing’
Our “Ask ActSeed” team recently received a question from an entrepreneur who wanted to restart his company, find angel investors and be prepared to provide investors with the info they want. Here’s what we told him:
“The information below is an important part of the story that an investor will want to know for sure. It seems there are two parts to your question:
- How to find investors and
- What to present to them when you find them.
First, how to find them:
While there is no single “exchange” to find all prospective investors, there are many venues and approaches to finding them. The best is personal networking – talking to people you know and finding out if they, or someone they know, might be interested in your deal. The other end of the investor-search spectrum is to do Google searches and cold call banks and investment firms to gauge their interest. This is a very low probability approach. In the middle are communities like ActSeed that help bridge an entrepreneur’s lack of personal investor network with connections to investors and investor groups. Some communities are free (e.g. LinkedIn), but investors don’t dwell there as free sites attract half-baked deals and lots of “noise”. Some have membership fees (like ActSeed), are more concentrated, and have a higher quality. None can guarantee a successful deal, but the good ones can help you reach investors you wouldn’t find otherwise.
However, reaching prospective investors is only a part of the equation…
Most professional angel investors, VC and other equity investors see hundreds, if not thousands, of deals each year. Most invest in 2-6 deals each year. This leaves 97%+ of all deals unfunded. The remainder get bootstrapped (e.g. self-funded through self-directed IRAs, savings, etc.), through debt (e.g. bank loan) or likely shut down or go dormant.
The second part is what information you present to the prospective investor.
- If an investor believes the information being presented to them is incomplete, they will stop reviewing.
- If an investor doesn’t “get it” very quickly – i.e. understand the business opportunity before then – they will stop reviewing.
Through ActSeed, entrepreneurs prepare the information that investors want to see using a scored profiling system. ActSeed scores the “completeness of preparation”, not whether the idea is viable. ActSeed’s scored profile enables the investor to have a uniform comparative against other deals that signals risk of successful implementation of the business model. It’s kind of like a FICO score for early stage companies. Here’s a link to a brief white paper about the ActSeed profile and scoring process.
ActSeed’s 1-page “Business Snapshot” template is an excellent framework for an entrepreneur to introduce their business highlights on a single page; if an investor “gets it” on that first page, they will be much more inclined to read further. The scored profile and Business Snapshot are available in ActSeed.com. Once your ActSeed profile is complete, you can search ActSeed’s Investor Group for prospective investors within the ActSeed community. You can also share your ActSeed link with any investor outside of ActSeed.
If you’re interested, you can learn more about the ActSeed Entrepreneur Group and sign up if you want to use these resources by clicking here. You can also download a free copy of ActSeed’s “Business Snapshot” template when you complete your free registration on ActSeed.
There are other communities and resources available to you that will also extend your reach into the investor community. In addition to ActSeed, we advise all of our community members to also use other networks that can be helpful. The new business creation and small business ecosystem is too fragmented and dynamic to fit one application or one community; however, a balance of communities can together drive value to those who build companies.
If you think your startup or product idea can survive an interrogation on national TV, then contact us now.
Yun Lingner is the Co-Executive Producer for a TV series on ABC called Shark Tank, a Mark Burnett Productions show.
If you’re not familiar with this show, entrepreneurs are selected to pitch their businesses to a panel of wealthy investors (e.g. Mark Cuban and Barbara Corcoran) in order to land an investor. We are helping Yun find some innovative businesses, products, business ideas and of course, entrepreneurs with interesting backgrounds or stories for the upcoming season.
If you’re interested in swimming with the sharks on national TV, send us an email to firstname.lastname@example.org with “Shark Tank” or “I want to swim with the sharks” in the subject line and we’ll get you connected directly to Yun.
If your deal needs some polish before jumping in the deep end, join ActSeed’s Entrepreneur Group.
Also, you can test your elevator pitch in ActSeed’s “Inside Pitch” discussion group on LinkedIn (it’s free).
Deadline to submit your idea, startup or small business? Just say “you snooze, you lose…”, and hesitate at your own risk.
How University-Affiliated Angel Groups are Helping Fuel Startups While Supporting Higher Education.
Angel investors typically congregate into formal angel groups based upon geographic proximity and interests in certain industry sectors and/or specific growth stages. While these characteristics generally reflect the commonality within the Baylor Angel Network (BAN), what makes this angel group unique is how they have integrated Baylor University into their operation.
Operating an angel group within a university setting drives benefits to a broader group of beneficiaries, from business students to the business schools they attend.
In addition to the standard angel-entrepreneur activity, Baylor’s Hankamer School of Business receives an angel-designated percentage of the profits from each successful investment in the form of a gift to the University – on average, 25% of the profits generated by the donor from a successful exit. Also, a few students at Baylor are selected to serve as research analysts who contribute to the evaluation of prospective deals. Baylor Angels also mentor the student analysts and share their wisdom with students taking entrepreneurship classes. BAN doesn’t require its angel members to be alumni of Baylor, but they do expect each BAN angel to contribute some of their returns to the University.
ActSeed is grateful to have the Baylor Angel Network involved in the ActSeed Investor Group.
The disciplined, methodical approach that BAN applies to their investment decisions meshes well with ActSeed’s own methodical process for helping investors quickly understand “what’s under the hood”. While BAN does very well in analyzing their deal flow internally, ActSeed Company (Entrepreneur) Scores provide BAN angels with another indication of how well a startup will perform in the due diligence phase. In other words, ActSeed can help entrepreneurs quickly “bubble up” to the surface with angels and reduce the time it takes to go from first contact to funding decision.
Kevin Castello, Executive Director of the Baylor Angel Network, shares his thoughts:
“Excellence is revealed in execution. A lot of emphasis is placed on the vision, the business plan, the team, and other components but without execution they are just words on a page. There are so many challenges for a new entrepreneurial venture and it is critical to have an honest evaluation of your business. I love that ActSeed is committed to help entrepreneurs be prepared for their venture and to provide them tools for that process. BAN looks forward to a continued partnership with the ActSeed community.”
Before approaching the Baylor Angel Network or any angel group, an entrepreneur must first explore whether investors would even be interested in their venture. ActSeed’s Investor profile helps clarify this. For example, an entrepreneur can review the Baylor Angel Network’s ActSeed profile to learn:
- What types of deals generally interest the 40+ angel investors who are members of BAN,
- Where BAN angels are looking to invest (across five southwestern states), and
- How much they intend to invest (amounts usually between $100,000 and $300,000, including participation in larger deals up to $2 million when there’s a lead investor already established).
For entrepreneurs who may be thinking about approaching the Baylor Angel Network, consider approaching them through ActSeed’s Entrepreneur Group where you can do more than pitch them an idea – you can demonstrate your “investor-readiness” through your ActSeed Scores and possibly get moved to the front of the line for consideration.
To learn more about the Baylor Angel Network and how they are integrating angel investing within the University, you can download their introductory document here.
ActSeed’s mission of reducing small business failure rates depend upon both well-prepared entrepreneurs and well-informed investors. This new series of articles, called “Kick the Tires”, will help both investors and entrepreneurs align for the best chances to achieve reciprocal success.
["Kicking the Tires" - an idiom - giving something an initial inspection before making a decision to pursue a transaction - origin: early car buyers would kick a vehicle's tires to see if they properly held air]
So far, we have been more visible on the entrepreneur-preparation side of the equation. Recently, we have started to make significant inroads on the other side of the same equation - sharing “best practices” with a new generation of small business investors and attracting seasoned investors with our methodologies that will help them accelerate the review process (“due diligence”) for making investment decisions.
“Kick the Tires” is a new series of articles that highlight the many issues that a small business investor or “startup angel” should address before making an investment decision. We’ll include red flags to watch for. We’ll review “tangibles” and “intangibles” alike. We’ll explore small business investing from almost every angle, including legal, financial, organizational, strategic and cultural.
To date, our primary efforts toward building new reservoirs of investor capital have been through our workshops and webinars (“How to Evaluate Prospective Deals Like a Professional Angel Investor“). These workshops are well-attended, but it feels like we try to cram two months of information into a two hour presentation. Seriously, we do share a lot of information in a short period of time. From there, we develop a relationship and rapport with the attendees to assure they have tools to find and evaluate small business investment opportunities within the ActSeed entrepreneur community and beyond. Kick the Tires is meant to supplement, expand and reinforce the knowledge shared in our workshops.
Who will benefit from reading the articles in this series?
Small business investors - both novice and seasoned. Whether you want to invest $5,000 or $5 million, you still should apply a defined due diligence methodology and process to assure your interests are aligned with your investment choice.
Entrepreneurs. These articles don’t contain fabricated hurdles or secret handshakes, but they do outline the issues that together create a solid business foundation that will give the business the greatest resistance to failure, which is another way to say the greatest chances for success. Investors don’t want to invest in a company destined for failure any more than the entrepreneur wants to build a business exposed to avoidable failure. In other words, what’s good for the investor is also good for the entrepreneur, making this series equally relevant to those building businesses.
Beyond the articles in this series, what can be done to help connect “well-prepared entrepreneurs” with “well-informed investors”?
Join ActSeed. Apply the knowledge that is shared in the articles by joining the ActSeed Entrepreneur Group or the ActSeed Investor Group. The principles and issues we highlight in “Kick the Tires” are the same that we use to connect compatible ‘treps and investors within ActSeed.com using our scored profiles and filtered search tools.
Finally, please send us suggestions or questions about small business investing that you’d like us to cover. We’ll do our best to address these issues here as well. Please send your questions about small business investing to: email@example.com.
Together, let’s get to work and build some wealth!
What is compatibility in the context of small business investing and why is it important?
Private direct investment is very different than buying a publicly traded security. Investors do not have the same regulatory support or liquidity as a publicly traded stock. While we have witnessed a number of publicly traded companies mislead the public with incorrect or incomplete information in the past, at least there is a formal structure with a set of reporting regulations and consequences for failing to adhere to those regs and provide certain information to investors. With startups and small businesses, there is much less information available and very little regulation on what must be shared with investors.
Because of this, there is a greater element of compatibility required between the small business investor and the small business.
Trust and Alignment of Purpose
Understanding this need for compatibility is one of the key topics in the ActSeed Investor Workshop (“How to Evaluate Deals Like a Professional Angel Investor”). Simply stated, we strongly recommend that seed stage investors and startup entrepreneurs are fully aligned in purpose and culture as well as around expected return on investment and “exit strategies”. At the early stages of a business, investors should be viewed as a partner, not as a transaction – a co-pilot and navigation assistance, not merely gas in the tank. The business risk is extremely high in the early stages of a new company and the investor should play an active role in helping the entrepreneur steer clear of pitfalls.
Last year, we created a fun vignette about how ActSeed was like an “eHarmony for startups and investors” – how we help match investor-entrepreneur compatibilities. Recently, we had an inquiry from an entrepreneur who didn’t quite understand our analogy, and interestingly, was persistent in trying to understand how we were an “eHarmony to investors”. So, we drafted a candid reply:
“Simply put, most early/seed stage investors look for strategic and long term compatibility, not “quick hits”. The days of throwing money into something based upon a whim or basic concept are gone.
eHarmony markets their community as one where “people are brought together based on the things that really matter” (the current front page quote on eHarmony.com). ActSeed does the same for investors and entrepreneurs.
To further apply the personal relationship / eHarmony metaphor: investors aren’t interested in “one night stands” and “casual encounters.” Investors are no longer being seduced by what sounds good without verifying what IS good. ActSeed provides a mechanism to help the investor verify and accelerate the due diligence process by 60-90 days.
The common theme from our growing Investor Group members is that they don’t have time to see millions of interesting ideas, but they want to quickly find a few good ones that match their interests AND that provide evidence of preparedness in the core areas of business …PLUS a demonstrated ability to execute a sound plan.”
We know ActSeed isn’t for every entrepreneur, but we pledge to our growing group of Investors that the companies and entrepreneurs they will find within ActSeed’s Entrepreneur Group are ready to “extend trust” through an early presentation of the due diligence issues that will eventually need to be addressed anyway. The sooner this information is “on the table”, the faster a deal can be done or the parties can move on. If you can use the ActSeed process to cut 60-90 days out of the due diligence process, why not?
Within ActSeed, in order for a successful investment to occur:
- ActSeed presents the questions to be answered
- The Entrepreneur must provide the answers
- The Investor must trust the answers
Are you an ActSeed Investor?
If you are someone who wants to invest an amount between $5,000 and $5 million in early stage, seed stage, startup or small businesses, please join ActSeed’s Investor Group. It’s free to join, takes 15 minutes to set up, and allows you to interact on a username basis and allows you to reveal your real identity when and if you choose (to avoid the possibility of “overly ambitious” entrepreneurs).
Learn more about ActSeed’s Investor Group through the resources below:
Click here to download a 1-page PDF about ActSeed’s Investor Group
Watch a two-minute video about ActSeed’s Investor Group:
Join ActSeed (no cost).
Let us know how we can help you get set up.
Thoughts for your first pitch:
Relax and enjoy the experience.
Let your passion come through, but keep it simple and concise, and don’t get defensive if you “cross nerves” with your audience.
Make sure you can quickly and clearly explain: what customer “pain” you’re solving, why your solution will sell, how you make money (and when), and how your investor can expect to realize their return on investment.
It’s ok to not have answers for everything. If you don’t have an answer, offer that you will get back to them with the answer. You might even acknowledge that their question is a good one and ask them if they have any insights to share toward converging on an answer.
Things we suggest not saying:
- “We have no competition.”
- “Our revenue projections are conservative.”
1. Investors may only listen when you tell them about a good idea.
2. Investors may “open their checkbook” if you (A) have a good idea and (B) can demonstrate that you have a plan to implement that good idea and turn it into a profitable one.
We champion all of this and more within our ActSeed.com community.
This note was originally a reply to a young entrepreneur on LinkedIn who was about to make his first investor pitch and was looking for advice about pitching.
In addition to our quick response to “making the first pitch count”, we also recommend buying the book, “Pitching Hacks“.
Now, go out there and make every pitch count!
Earlier this month, we led our first formal seminar entitled “How to Evaluate Prospective Deals Like a Professional Angel Investor” and helped about 40 attendees get started in the world of small business investing.
For two hours, we worked with this group to share the ins and outs of finding, assessing and engaging startups and entrepreneurs. Through an informal poll, we estimate this group represented about $1 million of investor capital. Some were interested in investing $5,000 to $25,000. Others were interested in $50,000 to $100,000.
Some were young and had full time jobs, but craved the opportunity and upside of investing in a startup. Some wanted to use some funds from a self-directed IRA and one person had recently sold his long-held business and was driven to explore investing to keep his mind and business acumen stimulated.
What all attendees had in common was a desire to understand some of the nuances of small business investing – what to look for, what to expect and what to avoid.
What our attendees learned:
- Understanding the early stage investor landscape, the different types of early stage investors and how investing in a small business is different than buying and selling publicly traded stock.
- The importance of identifying deals that are in areas where direct experience exists.
- The Tangibles: A “checklist” approach of the issues a prospective investor should address with the entrepreneur before proceeding.
- The Intangibles: Issues beyond intellect and into instinct, where a shared sense of trust and aligned purpose are important.
- Actual testimonials from angels who have invested in and have nurtured multiple early stage businesses.
- Forms and compliance: Documents each prospective investor should know about when pursuing a deal, as well as the role and importance of legal counsel in “doing the deal.”
- Action Items and Next Steps: sharing tools and tactical activities that transform small business investing into a systematic process so investors can make informed decisions.
What we learned:
The interest in small business investing is enormous. Through this inaugural conference, we have received local media attention and will soon have some national exposure. We have been invited to host this workshop in three other cities and are exploring two potential national webinars as well. In short, we learned that we have an important role to help coach a new generation of investors.
The diversity of those interested in learning how to approach startup investing is broad. Men, women, all age ranges and ethnicities. There seem to be quite a few people who want to be part of the startup revolution, but don’t have the ability to strike out on their own, or just don’t have their own ”big idea” they want to commercialize. But they want to be part of the new business ecosystem and they have some of the estimated trillions of dollars that are “sitting on the sideline” ready to support an entrepreneur with well-prepared business model.
Finally, we learned that responsible investors want to be as well-prepared as the entrepreneurs they are considering investing in. We learned that ActSeed’s Investor Group is a great tool for new investors to evaluate startups looking for funding.
In summary, what’s good for the entrepreneur must be good for the investor, and vice versa too. It cannot be out of balance. Intangibles like trust, synergy, purpose and company culture are important. Investment should only occur when there’s a focus on “business basics” with transparency and reciprocal communication between investor and entrepreneur; this is not the same as buying a share of Microsoft or GE. As a small business investor, you must be engaged as an ongoing partner in helping your business investments succeed.
ActSeed carries a clear message to all participants in early stage business creation and growth: “Preparation for success helps avoid behaviors that lead to failure.”
If you are interested in hosting one of our Small Business Investor Workshops locally or via webinar or if you are interested in becoming a small business investor, please contacts us at firstname.lastname@example.org.
If you are an aspiring seed stage or angel investor and want to get started now, you can join ActSeed’s Investor Group (there is no cost to join) and start applying the principals we share in our workshop immediately. Learn more about the ActSeed Investor Group here.
We are already working diligently to find and guide more investor millions that we can connect to well-prepared entrepreneurs.
While the full day of panel-driven sessions was meant for tech companies, most the wisdom shared applies to almost any emerging company in any industry.
While there was plenty of content about intellectual property, privacy and outsourcing, not surprisingly, the most popular session topics centered on investment, funding and financing.
The opening general session included a panel of local southern California angels and venture capitalists, including JP Lapeyre of the Tech Coast Angels, Ted Alexander of Mission Ventures and Carl Eibl of Enterprise Partners.
One particular exchange revealed some excellent insight worth sharing here with entrepreneurs in any industry. Even those who are not looking for funding will find this dialogue insightful. The moderator, James Chapman of Foley & Lardner, asked the panelists, “What do you look for in an entrepreneur?”
The answers included:
- “People who can get it done.”
- “Done is better than perfect.”
- “It’s all about execution.”
- “Someone willing to have a dialogue with, and listen to, their investor.”
- “Rapport is important.”
- “Self-awareness. Knowing where your gaps are”
These answers resonate with the ActSeed team and we hope resonate with every entrepreneur. These responses emphasize our mantra that investors seek not only the good idea, but a team with a demonstrated ability to execute the idea in a disciplined, planned manner.
This does not suggest creating a rigid plan and pursuing without regard to realities as they unfold. This also does not suggest “making it up as you go”.
It does, however, underscore the need to have a thorough plan that is constantly being interrogated and refined, which is the foundation and purpose of ActSeed’s Entrepreneur Profile / Evaluation process.
What answers would you add to the ones given by the conference panel?