What do Angel investors look for?
Angels are really focused on the founders, whether you’re a female founder in an all-female team, or a mixed gender team. It is very important to show that you and fellow founders have the skills, knowledge, experience, passion and ambition to successfully grow a business.
Make sure that you can demonstrate why you have set up your business, the opportunity or need that you have identified and the solution that you have developed.
TOP TIP: Don’t be afraid to be passionate and make sure you focus on all that you have achieved so far, and share any recognition you’ve received and what traction you have gained so far.
Here are five things you can do to show potential angel investors why you set up your business:
- Make sure that you have set out your strong understanding of your market and the market share that you will be able to achieve through your business.
- Show that you have a clear business model demonstrating how you can make money.
- Make it clear that you really understand your competition and how you will stand out against your competitors.
- Highlight that you have a clear strategy for building and growing your business that will be matched by your financial projections.
- Don’t forget to set out clearly how much money you need and do not fall into the trap of asking for less money than you actually require. It’s vital to show that you have ambition and a clear understanding of the finance you need to achieve your growth strategy.
How do you find Angel investors ?
Ideally you want to look for investors who have strong experience. This could be either within your own industry, or market identifying individuals who can help you navigate your journey with strong connections. It’s useful to have warm introductions because angels have many other deals that come towards them. This means it’s helpful to have someone that they understand or trust to bring that deal to them.
However, we know that for many women, they are not part of those networks or contacts with the key players in the investment market. Pitching events are a great way to find opportunities to interact and speak with investors informally. It’s also always useful to speak to founders that have already accessed investment from that group of investors.
Top Tip: many Angel groups operate open hours when you can go and have informal conversations with investors, present your business and opportunity to them and gain valuable feedback.
You can find these Angel groups in our database – simply filter for ‘Angel investment’
UKBAA has an extensive directory of Angel syndicates across the UK including syndicates that are female or have a focus on female founders and many of these Angel groups have a direct application process.
Finding Female Angel Investors
The challenge for many women seeking investment is that the majority of angels you will meet are still likely to be male. Recent research from the UKBAA has shown that only 14% of angels are women – 5,000 out of a pool of 37,000. So, for women founders it remains challenging if you want to have either all women backing your deal or at least several women backing your deal.
However, there are a growing number of female-focused angel groups in the UK. Some of these are all-female, or some predominantly female and with a very strong focus on backing women founders. You can find these listed in the finance providers’ database and there are some suggestions at the foot of the page.
What is the Angel investment process?
If you are successful in having a further meeting with and angel or group, you may then be invited to attend a pitching event or meeting. This is when you will get the chance to present your business and gain more detailed feedback from the investors. It will be important to remember to follow up with any investors you meet and to keep in touch with them to gain further meetings.
Prior to investing, angel investors will normally seek to review all the aspects of the deal. This enables them to investigate the key aspects of the business and the investment proposal before committing. Angel investors do significantly less due diligence than VCs, which can take weeks to do the checks and core information requirements. Generally angels will take no more than 20 hours in total, using their core industry knowledge and experience among their fellow investors, combined with their own gut feeling and a sense of good chemistry to make the final decision.
Offering EIS/SEIS tax reliefs to investors
A key aspect of your relationship with the investors and gaining their support is to be able to offer them the opportunity to use the Seed Enterprise Investment Scheme (SEIS) or Enterprise Investment Scheme (EIS). These offer significant tax reliefs to investors and help tremendously in de-risking the deal. Before meeting them is useful to have already confirmed that you are in a position to offer your investors access to SEIS or EIS.
Top tip: Ideally you should have an “advanced assurance” from HMRC, which can make all the difference in enabling the investors to take the decision to invest in you – it’s your gift to investors, so make sure you’re well prepared.
How do I work with my Angel investor?
The foundations for a successful working relationship are laid long before anything is signed. Be clear and honest with investors from the outset about the nature of the partnership. Be transparent about what they should expect of you in terms of contact, information, or accounting. Clarify the kind of involvement they will have beyond the financial, and highlight the help and support you would like to access. It’s also important to agree how you will communicate with your investors and keep each other informed.
Remember Angel investment is a long-term relationship and you need to get on with each other throughout your growth journey.
About the author
Jenny Tooth OBE is an Angel investor and Chief Executive of the UK Business Angels Association, building the Angel community around the UK, connecting investors to deal flow and assisting entrepreneurs to attract investors. Jenny sits on the steering group for emerging technologies and innovations for Innovate UK. She is an experienced speaker on Angel investing and entrepreneurship in the UK and internationally.