The most common question I get from early-stage entrepreneurs is about how to find Angel Investors. If it seems like they are hard to find – or hard to convince – it could be you are looking in the wrong places. Finding the Angel that is the right match for your venture is just Marketing 101 – find the ones who have their heart in your technology or product, not ones just appraising it as a purely financial investment.
The best Angels prefer to invest in those industries that they know well and are passionate about. If you go after people with relevant life experience – instead of those who simply invest by the numbers – you’ll have a much better luck.
That means a golfing venture should raise money from golfers. Wine technology start ups should target people in and around the wine industry. Energy companies should look to retired oil and mining company executives. Internet-based companies should look to the younger crowd who are heavy net users.
I call these “Affinity Investors” – they invest because they have an affinity with your company’s product, industry, service or customers. As such, they bring emotion and passion into the deal – things that pure financial investors lack.
It’s not a complicated idea … but you’d be surprised how many people ignore this simple approach.
Here’s a true story of an entrepreneur I encountered in San Francisco a couple of years ago. He started a medical venture in 2003 to commercialise a device that helps incontinent men manage their condition. Try selling that one with passion!
Although incontinence is not uncommon, this chap found that most VC and Angel investment groups did not understand the true potential of his new product. “Everyone loved the idea; but no one would invest,” he told me.
So he took a different approach. With limited time and resources, he asked himself ‘who should I target?’. The answer was simple and obvious – finding Urologists to invest was the one thing he could do to most increase his chances of making it in the market. Think about it – well established Urologists would be cashed up and would have a deep affinity for the value proposition. What would a VC know about incontinence?
Urologists not only understood the product but were eager to invest in something that could improve the quality of life of their patients. From one presentation at a Urology clinic, this entrepreneur found ten angel investors who put up enough seed capital to get the product prototyped and to complete some initial market testing. It didn’t take long before the word spread among the other Urologists. The company’s second round of funding was over-sold. Within 48 hours of opening the second round, all the equity was earmarked.
There’s another huge advantage to this simple strategy. You can get cash from any investor….but affinity investors bring deep industry knowledge that makes your company more credible to customers. Affinity investors bring connections and credibility – and importantly passion and enthusiasm, things that you can rely on when the shit hits the fan….excusing the pun.
No matter what industry you are in, it’s simply a matter of first of all, identifying the non-financial rewards for investors and then following your industry’s value chain and pin pointing the potential angels along it who would really understand your venture.
The lesson for entrepreneurs is clear: Angels invest for many reasons, and finding a compelling motive – whether financial or not – can be the key to an angel’s heart…and his checkbook.