Angel investments are an important funding source for early-stage companies in the UK. One of the biggest challenges entrepreneurs face when starting a new business is securing funding.
By investing in companies with diverse teams, providing active involvement, and having patience, angel investors can help startups grow and thrive while realizing a profitable return on their investment.
A report by the Centre for Entrepreneurs found that it takes an average of 3.7 years for a UK startup to reach its exit event. Angel investors who are willing to wait and support their portfolio companies through their early stages have a greater chance of realizing a profitable return on their investment.
Successful angel investments often involve selecting the right company to invest in. Research conducted by the UK Business Angels Association found that companies with diverse teams, a clear market need, and a strong management team were more likely to receive angel investment.
Furthermore, companies that received angel investment were more likely to experience faster revenue growth, with a 17% increase in average annual revenue growth compared to non-angel-backed companies.
Active involvement is another key factor in successful angel investments. A study by the UK Business Angels Association found that 89% of angel investors provide strategic advice and support to their portfolio companies, helping them to develop and grow.
This active involvement not only improves the chances of success for the portfolio company, but also increases the likelihood of a positive return on investment for the angel investor.
Is your company seeking Angel Investment?
To help you become investment ready, here are the top 10 things angel investors look for in a startup before investing.
1- What is a solid business plan?
The plan should include a detailed description of the product or service, a target market analysis, a marketing and sales plan, and a financial plan. Can you demonstrate a solid understanding of your industry, competition, and customers?
Are your goals realistic and achievable, and can you show that you have a clear roadmap for how to grow and scale your business over time?
2- Why is a strong management team important?
A strong management team is essential for Angel Investors. One with experience, skills, and knowledge to execute the business plan. This includes not only the founders, but also any key advisors with defined roles and responsibilities, and everyone on your team is working towards a common goal.
3- How do you show evidence of traction and growth potential?
Do you already have evidence of customer demand? Can you demonstrate that your business has a clear path to profitability and that there is a large and growing market for your product or service?
4. What is a defensible competitive advantage
Does your company have a unique product or service, proprietary technology, or a strong brand? What is your competitive landscape? Please share this and demonstrate you have a plan in place for how to maintain and strengthen your competitive advantage over time.
5- Why do you need a well-defined exit strategy
Does your plan tell a story of showing that investors will eventually be able to cash out their investment? Can you demonstrate that you have a clear understanding of the potential exit opportunities for your business and that you have a plan in place to maximize the return for your investors?
6- What financials do Angel Investors want to see
Your plan must include realistic revenue projections, cost forecasts, and cash flow analysis. More importantly, you need to demonstrate that you have a clear understanding of your business’s financial needs.
7- What knowledge do you have of the risks of your business
Do you have a clear understanding of the risks associated with your business?
Can you easily demonstrate knowledge of market risks, operational risks, or financial risks? Do you have a plan in place for how to mitigate these risks, and that you are prepared to adapt and pivot if necessary.
8- A well-defined use of Angel funds
Can you show you have a well-defined use of funds, which means a clear plan for using the funding you receive to achieve your business goals?
This might include investing in product development, marketing, advertising, or expanding your team.
9- How is the business scalable
Angel investors are looking for startups with a scalable business model, which means a business that can multiply without significantly increasing costs.
Can you demonstrate that your business can scale effectively and that there are no significant barriers to growth?
This might include having a repeatable sales process, a well-defined customer acquisition strategy, or a strong network effect that can help drive growth.
10- A driving passion to succeed
Finally, angel investors want to see that you are a passionate and committed founder who is fully committed to the success of your business.
Are you willing to work hard, make sacrifices, and do whatever it takes to make your business succeed?
Can you demonstrate that you have a clear vision for your business and are passionate about the problem you are solving and the impact your business can have?
At Logros Advisory Partners, We help in sourcing angel investors for startups. We have successfully helped many startup companies seeking funding from angel investors. If you need professional consultation, Please feel free to connect here.