START-UP ADVICE

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MAKE IT START UP ADVICE HOW TO FIND AND WIN OVER ANGEL INVESTORS So you have a fantastic idea, you’ve set up your company, and now need funding - but where do you go and what do you need to prepare to win over an angel investor? 22
A n angel investor is a bit of a misnomer. There are many types of “angel” ranging from the successful exited entrepreneur or retired investment banker through to those that invest a few thousand through the SEIS scheme. SEIS (Seed Enterprise Investment Scheme) is a great tax incentive introduced by the government in 2012. It effectively means you can get half of any investment made into a young company back through tax relief (less than 2 years trading). So if you invested £10,000 into a startup you could get £5,000 back from the taxman. That’s a great incentive and why so many new angels have entered the arena. Angels also can be full time investors or fully employed professionals having a “dabble”. The latter mostly invest through angel syndicates , SEIS Funds or crowd-funding. There are multiple ways of investing now that SEIS is so popular. What is the difference between investing into a SEIS Fund as opposed to investing directly into 1 company? The primary difference is that the investment decision is made by the fund manager instead of the investor. Also the person investing into a fund has a portfolio of investments rather than one focussed investment. Angels come in all shapes and sizes and identifying them is very difficult. I liken raising investment to fishing. You have to land the right one! That’s the first task. Find the right angel who shows interest in your business. Ideally they have a background in your industry which means they can bring “smart” money to the table as opposed to “dumb” money where it is just an investment with no added value. Will this “fish” be willing to be the “lead” angel? You need a ‘lead” angel in most situations. If you can land the right lead angel then it will most certainly be easier to get others to “tag” along behind. Humans are pretty simple beings when it comes down to it. Follow the leader! Once you have landed an interested angel who can add value to your business you need to persuade him/her to invest. But before all that you need to make sure you are investor ready. What documents do you need? At minimum you need the following (this is for any company seeking SEIS funding primarily and not Series A): 1. A 2 page executive summary This summarises the exciting parts about the business. What is the USP? Who is the team? Who (other than the team) have said this is a great business (potential partners or better still customers). Forecast sales for 3 years and exit potential. 2. A short business plan. You do not need a 50 page business plan to raise SEIS. A 10-20 page extension of the exec summary is all that is needed. Look for a template online. There are many to choose from. You do not need someone to write this. Do it yourself and save the fees. Include key milestones for the first 12 months in detail and 3 years in summary. 3. A forecast Which should be a profit/loss forecast for 3 years. Most important of all is a cash-flow forecast for the same period but with particular emphasis on the first year. You will make or break the business in the first year so pay real attention to the cash-flow needs for that period. This should be reflected in what investment you are asking for. 4. A powerpoint presentation long form and short form This is key as you will need to give 2 different types of presentation. In the case of a pitch to an audience of say 50-100 people use the short form version. In the case of one to one style presentations use the long form. With the short form version make sure you get the key points over in a graphically exciting way. If you have all these done you will be in good shape. I would also recommend you open up a dropbox folder where you start to collate due diligence documentation. There are standard indexes available. An investor will be very happy that you already have the DD process underway without him asking! And you need a clear investment strategy that is sensible. Do not try to raise £1m if you are an idea or pre revenue (there are exceptions but very “FUND RAISING IS AS MUCH ABOUT PLANNING AS YOUR BUSINESS IS. BE PREPARED. TAKE YOUR TIME. BE SENSIBLE. BE REALISTIC ABOUT AMOUNT AND VALUTATION ” rare). Raise the smallest amount you need stage by stage from smart angels who can bring value to the table by advising you. Try to get a LEAD Angel first. Someone who will invest say £20k-£50k and take the lead in any round. Other investors will come to rely on them and follow them. Sweeten the pill if necessary by giving them more than the other investors as they were first in. Fund Raising is as much about planning as your business is. Be prepared. Take your time. Be sensible. Be realistic about amount and valuation. If you have a good business you will get funded but it will take time! 23
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