Angel investment is on the rise with around £1.6bn invested into startup businesses each year in the UK and, while it can be an incredibly successful way to build and grow a business, an angel needs just as much convincing as a VC to invest in a new product. Doris Retfalvi takes a look at the most common pitching mistakes that can drive away angel investors.
As previously established, securing funding from a venture capitalist is increasingly challenging in today’s risk-averse world of medtech investment. VCs are looking for businesses that have already performed initial research into their product idea and have tangible proof of its potential. However, his work cannot be done without an initial funding round, which nowadays is provided more and more by angel investment or crowdfunding.
‘Medtech startups are increasingly looking to angel investors, not only because of the funding support, but also because they are often able to give them access to an unrivalled depth of industry and sector insight and connections that you really can’t put a price on,’ says Darren Gowling, Senior Investment Director at Co Angel Investment, a government supported service that links syndicates of business angels to innovative high growth businesses in the Greater Manchester area.
‘Angels with a medtech background will also understand the process and timescale of bringing a new device or product to market and will be in there with them for the long term, possibly when additional funding is also needed,’ Gowling adds.
So what does it take for a pitch to attract an angel investor’s attention? Below Gowling lists the top five mistakes startups should stay clear of in their pitch.
‘Investors dream of finding the next big consumer product and without momentum driving your sales, getting an angel interested will be hard,’ Gowling says.
Solution: If you can demonstrate evidence of customer adoption – number of users, channel partners, sales at events, social media response – that illustrate how you can drive revenue scales, investors will be keen to know more.
‘Figures plucked from the air that outdo even the market leader,’ in other words. Any forecasting has to demonstrate that you’ve done your research and are being realistic.
Solution: Your angels need to know just how you will be able to penetrate a potentially crowded market with your product or service. Think globally rather than nationally too; online markets now open up overseas sales to more businesses than ever.
‘After any pitch, feedback from seasoned business people is the most valuable thing that a business can get,’ Gowling explains. Inexperienced entrepreneurs tend to be very sensitive about their project and often refuse to see the faults in it.
Solution: Expect the good and the bad, take it in your stride and listen up. If you’re right and they’re wrong any investor will be the first to congratulate you.
‘Investors don’t have time to listen to a long drawn-out pitch with very little useful information.’
Solution: Stop spinning information, be honest about what you’ve achieved and stick to the facts. Angels will much more appreciate evidence-backed information than a pitch that promises them the moon.
‘An Angel will be looking to recoup a significant multiple of what they are looking to invest. They know that it will sometimes be more and sometimes less but a startup or early stage business is a big risk and the angel expects a return representative of the risk.’
Solution: Accept that investors will be very wary of any potential risks, but with every small success they will probably want to invest in you more. Be patient, keep communicating with them along the way, and ensure you are meeting their expectations.
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