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Beyond the Pitch

What Startups Can Learn from 600 Angel Investors

I recently had the opportunity to attend the 2015 Angel Capital Association (ACA) Summit. More than 600 angel investors congregated in Philadelphia for this annual conference focused on best practices, data and networking.

While I was certainly attending to learn about the mechanics of angel investing (I’ve not been on that side of the equation!), I couldn’t help but think about how valuable the insights shared would be to the average entrepreneur.

So I’ve distilled the best advice from the sessions I attended here. Enjoy!

Be focused, but look for serendipitous moments.

Watching a session on geo-synchronous satellites spurred Kay Koplovitz, founder and CEO of multi-billion dollar USA Networks, into innovation and her career. That serendipitous moment changed her life.

Angel investors are becoming more diverse.

Women aren’t being rejected; they’re just disconnected. Springboard was created to provide that connection and entrée into the market. When Springboard began, the group hoped for 100 applications to yield 10 to present. Instead they received 300. In 2015, 5 percent of angels were women; in 2015, 24 percent of angels are women.

Kay Koplovitz, USA Network, Co-founder of Springboard Enterprises Editor, Been There, Run That

Identify strategic partners and potential acquirers ASAP.

Don’t wait to do this, do it from day 1. Categorize strategic partners as “ends” (acquirer)” or “means” (a path to reaching an acquirer). Perfect your message of how your company is fulfilling an unmet need.

Lauren Flanagan, Tech founder and investor Founder, Phenomenelle Angels Fund and Belle Capital USA Invest in women led companies

After investment, ensure that follow-on capital is there.

Too often entrepreneurs present business plans that say first round capital is all they will ever need. Experience tells angel investors that can’t be the case.

In seed rounds investors invest on the promise, but follow-on capital must show some results. With follow-on capital you bridged from being purely promise to promise plus something. And that’s results. There’s no place in between. I either want a 30X return or a zero.

Dan Rosen, Early stage investor in more than 80 deals Chair of Seattle Alliance of Angels

Understand what coachability truly means

Most investors understand what this means; many entrepreneurs do not. To an investor, coachability isn’t assessing whether or not an entrepreneur will listen and do what investors what him or her to do, but rather it is assessing whether or not the entrepreneur understands that investors are giving them data and then observing how the entrepreneurs processes and acts on that data. The only way to find out if a founder is capable is to interact with him or her.

Be open to real mentoring.

Giving advice is telling entrepreneurs what they should do. Mentorship is much more dynamic and talking from experience. Not giving an answer but providing data to help them make the best decision.

Investors want founders to want them as an investor as much as the investor wants to invest in the entrepreneur’s company.

Think hard about crowdfunding.

Anyone who believes there won’t be a lot of complexity and confusion along the way, is deceiving himself.

Crowdfunding will be a difficult funding mechanism for companies who need to raise capital beyond a seed round. If an entrepreneur expects to need investors down the road, be wary. Crowdfunding might end up being powerful, but it likely will take a couple of years to understand the full implications once all the rules are out.

Brad Feld, Foundry Group

 

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