Angel financing – What angels look for in a company: Management (part 4 of 6)

Now that you have given investors an overview of your product, market potential, and competition, they should have a good idea of what your company is all about and what its potential is. The next, and arguably most important topic, to cover is your company’s management. So why is management so important? Its because since early stage companies are risky and have a high chance of failing, investors look to the company’s management to ensure they have the experience, skillset, and connections to give the company the best chance of succeeding. A strong management team would include aspects such as:

1. The CEO has a history of successfully starting and and selling companies – i.e. there is a past track record to give confidence that he/she can do it again
2. The management team has worked together on past ventures – i.e. there is a past track record that the team works well together and there are no team dynamics issues
3. The management team has deep experience in the industry – i.e. they have the credibility and relationships in the target industry to help get traction for the company?s product/service

Now there are lots of examples of first time CEOs that have established very successful companies. So don’t take the above that I am suggesting its not possible. What I’m saying is that for outside investors that don’t know you or your company, having a past track record of successfully doing a similar activity provides more comfort. You would probably approach things the same way if you were looking to hire a key employee for your company – you would want to find somebody that has strong past work experience in doing a similar job.

Since many early stage companies will not have a fully rounded management team, here are some strategies to handle this:

Missing positions
When a company first starts out, most likely the founders are wearing multiple hats in the roles they play. As the company grows, it is natural to bring on more members of the management team to add more specialized experience (i.e. a dedicated CFO, sales director, etc). Investors will understand this, so when you talk about your management team you should highlight the positions you feel it is missing and ones you would look to hire. This will demonstrate you can accurately assess your team and understand how it will need to change as the company grows. As some angel investors are looking to get involved with a company, they may be interested in joining the team to help the company or know of somebody else who would be interested. You should also be prepared to discuss what you see as your role in the company going forward and if you see yourself as always being the CEO. There may come a time when as a founder of the company you need to bring on another person as CEO that can take the company to the next level. I will talk more on this topic in a future article on founders syndrome.

Board / advisors
Another way to enhance the experience / credibility of a company’s management team is to build up a strong board of directors or advisory board. You would want to identify people that can provide value to the company in either the experience they have (i.e. if this is your first time as CEO you would want to find somebody that is an established CEO) or in the contacts they have (i.e. find somebody that is well respected/connected in the industry your company is targeting). By having these types of people involved with your company, you will be able to consult with them to discuss issues/problems your company is facing and tap into their networks to help open doors for sales, partnerships, alliances, etc. Another benefit is that it will help out the due diligence process with investors.

Usually the first thing a group of angels will do in evaluating a company is to reach out to their network to find somebody in the industry or who knows of somebody on the company’s management team to get their insights on what they think of the company. If you have well respected people on your board or advisory board that believe enough in your company to put their name behind it and spend their time to help out, it will go a long way in establishing outside verification that your company is onto something.

In my next article, I will talk about the financial aspects of your company to cover in an investment presentation. As always, if you have any questions, comments, or suggestions for future articles feel free to contact me: craig at mapleleafangels.com