business fundraising table, but building Kinko’s was a little more luxurious than most experiences, because our co-workers were so eager to invest in the company. Rather than a franchise or corporate ownership structure, we created a series of partnerships. Each partnership owned the Kinko’s stores in a geographic area.
Eventually, I had more than 200 partners in 127 partnerships. That’s a lot of investor-partners, and there was no shortage of conflict. But there were also more eyes, ears, and ideas available. When you work with good partners, you’re better able to stay focused on the big picture—to look ahead at ways to grow your company and deal with the major issues, not just the day-to-day problems. You’re able to work “on” your business, not just “in” your business.
Fundraising is never easy. I know that from experience, because we had a very democratic structure at Kinko’s, so I frequently had to sell 200 partners on the necessity of re-investing for growth. It takes more than persistence to raise the money you need. You need to know how to approach people, how to pitch yourself and your ideas, how to get to know the people you’ll be asking for money and eventually working with.
After Kinko’s, I started an investment firm called West Coast Asset Management. While the company focuses on public equities, we also receive many requests from private companies. My partners and I sort through numerous proposals every week, and I’ve been able to see what many entrepreneurs do right—and many more do wrong—when seeking money for their businesses.
As a prospective investor, I look for three things first:
1 1. I want a brief and clear presentation of what the business does, how it makes money, and how it makes money for investors.
2 2. Does the proposal ask for enough money? Liquidity is essential; those who try to impress me with frugality only seem unrealistic about the needs of a young business. I admire frugality, but I invest in reality.
3 3. Does the presenter look me in the eye, shake hands, and demonstrate conversational skills? I prefer to invest in people who function in the real world and are not completely myopic about their business. I want to see the right social skills for leadership.
Not all money is created equal; you want a good partner, not just a check. Think about how prospective investors treat you. Do they make you feel welcome by personally greeting you, offering refreshments, getting to know you? Or is your experience more like a cattle call? This reflects how you will be treated in the future. Don’t just calculate how much money you need; define what kind of partner you can live with.
Finding an Angel Investor In A Day will help you realize your fundraising dreams. It will give you the tools you need, including methods you can use to find an angel, tips and tricks for making the best presentation you can, and even strategies to improve your negotiating skills.
Remember, partnerships start with little more than a handshake. And the best thing in life is making something out of nothing.
How to
Use This Book
To create Finding an Angel Investor In A Day, we gathered the most important and useful information about raising money from private investors from the people with real-life experience—angel investors, entrepreneurs who’ve raised money successfully, members of angel groups, and others who advise entrepreneurs on financing. We focused on what you need to know to locate and attract an angel investor and to understand the key terms you’ll encounter in the process, especially in the early stages.
Finding an Angel Investor In A Day is organized in a step-by-step fashion, outlining the information you need to know during every stage of finding and securing an angel. While it is certainly useful (and recommended) to read this entire book regardless of how far along you are in the fundraising process, you may want to focus on different sections, depending on your particular situation:
If you’re brand-new to the fundraising process, you’ll definitely want to follow this book from start to finish. Begin with Step 1 to learn what angels are looking for in an investment, whether an angel is right for you—and whether you are right for an angel.
If you don’t know where to find a potential investor, you’ll be particularly interested in Step 2, which details how to locate an angel—whether an individual or an angel who is part of one of the increasingly popular angel groups.
If you’ve already identified an angel investor, you may want to go straight to Step 3, which deals with how to prepare your company for the fundraising process, and Step 4, which gives guidance on how to successfully pitch your venture to an investor.
If you already have an angel who wants to invest in your company, you might turn directly to Steps 5, 6, and 7, which deal with the all-important issues of valuation, negotiation, deal terms (including the term sheet), and the due diligence that angels will conduct on you and your business.
Once you are at the point of negotiating a deal with an angel, it’s absolutely critical that you get a qualified securities attorney to help you with your own deal. While this book enables you to become comfortable with the key terms of investments, such deals are extremely complicated, with major financial and personal implications.
Using This Book
Throughout this book, you’ll see worksheets and checklists you can use to write down the information to guide your own search to find and secure an investor. If there’s not enough space on the worksheets, use a separate piece of paper to record your thoughts and data.
The Market
Use the following worksheet to prepare a market analysis. You’ll use this data when you answer a potential angel’s questions about the size, characteristics, and potential of your market.
| Where is your target market located? (City? Country? Region? Urban? Suburban?) |
| What are the characteristics of your target customer? (Consumer customers: Age? Income range? Gender? Family size? Education? Business customers: Number of years in business? Number of employees? Industry?) |
| What motivates your customers to make purchases and what are their buying patterns? |
| What is the size of your market? |
| What have the growth rates been in your market for the last 5 years? |
Evaluate Prospective Angel Groups
Fill out this worksheet to evaluate the groups you are considering or that you’ve approached. Make a copy for each group you evaluate.
| Name of prospective angel investor group: |
| Proximity: |
