What it takes to woo an angel investor
On average, angels look for 20 percent to 40 percent of the company. They can invest from $10,000 to a high of $2 million, but the average is usually from $250,000 to $750,000, Hudson says.
Barry Paulk, owner of Quest Executive in Encinitas, Calif., an executive search firm, and a member of Pasadena Angels, says angel investors often will insist on a board seat.
Arrogance doesn't play well with angels. "It's extremely important that the entrepreneur be coachable," Paulk says. An advantage of angel investment groups is that many members have been successful entrepreneurs with experience across multiple disciplines and can provide advice and perspective.
In fact, many angel groups will offer prescreening coaching. "Angels want you to succeed," says Hudson. "The success of their investment depends on the success of the company."
Paulk advises entrepreneurs to seek out an angel investor who can vet the project, make sure you've met all the criteria and comment on how to improve your presentation.
Talk the talk
"Understand your elevator pitch thoroughly and be able to make within 30 seconds," says Paulk. "Tell us what you have, why it's going to change the lay of the land in some fashion, and why we should be interested."
Lose the jargon and be succinct. The people who get a call back have a good idea they articulate well, strong financials and sound growth projections. Exaggeration is a big no-no. "If your financials aren't sensible, you'll lose all credibility," Paulk says.
Focus on how the product will produce revenue. "Spend time talking about the business because these are business people who are listening to you," Weelborg says.
Know the way out
Angels want to know your exit strategy. The average length of time angel investors stay on board is five to seven years. Typical exit routes include a sale of the company or a buyback of the angels' stake by the founder.
"It's important to define some options early on," Weelborg says. "Make a case for how it would happen, why it would happen and when it would happen."