in more than Two decades as an angel investor and early-stage company scout, I’ve been soliciting funding from hundreds of entrepreneurs and sat through an equal number of slide deck pitches.
You can say that I have seen it all. From my perspective as an angel investor and former entrepreneur, here are five essential factors I look for when considering my next investment.
Offer a game-changer that stands out
To attract the right angel investor, be sure to present a compelling technology or product offering that solves a significant customer problem. Be sure to demonstrate your unique competitive advantage – Incremental improvement in competition is not a winning formula for attracting investment.
Include key market metrics such as TAM, SAM and SOM. TAM (Total Addressable Market) is the total revenue possible if a product or service is to achieve 100% market share. TAM answers the question of who will theoretically buy your product or service. It describes the total revenue that a company can make if it has a monopoly with the total market share for its product or service.
TAM for the non-alcoholic beverage category, takes in the worldwide non-alcoholic beverage market across several categories where I invest, looks at all revenue from beverage purchases, visualizes sales in all countries of the world, and No competition considers except tap water. SAM (Service Addressable Market) is the TAM segment within the geographic reach that you can target with your products or services. Finally, the SOM will be market share that a company can capture over time.
current solid financial
When presenting to angels, it is important to show traction with respect to proof of concept, product/service development and revenue. Knowing your company’s financial position and presenting your numbers to investors is paramount, as is making sure the past and current numbers you have presented are accurate.
Investors want to look at Top Line, Gross Margin and Net Profit Margin. Don’t be tempted to exaggerate or hide trouble spots; This is a huge red flag that investors will see, reducing your chances of getting the investment.
Founders in a good economy tend to have too high a valuation for their company. resist the temptation! Marjorie Radlow-Zandik
Case in point: Two venture capital conglomerates recently pulled out of a game-changing SaaS company investment because the founder radically floundered financially and misrepresented the product development phase.
Make a realistic five-year projection that includes profits and losses — a mid-level projection that isn’t too optimistic or too conservative is best. These financial projections give investors a look at the future of your business’s sales, cost of goods, operating expenses and bottom line income. They become a collection of projections and forecasts that give a data-backed view of your company’s financial future.