Year: 2007

In my next two articles, I will talk about pitching for investment money. In this article I will talk about the stages in the pitch process. When pitching to angels through an organized angel group, there is a multi-step process you need to go through. Your end goal is obviously to close a round of financing. However depending on what stage you are at in the process your goals for that step will be different. The best analogy is thinking about the process you go through to apply for a job at a large corporation. So to illustrate, lets walk through the steps for both:

1) Initial application

Job search – you see an ad for a job in an on-line job board or in the paper. You write up a cover letter and a 2 page resume to summarize your experience and why you feel you are a good fit for the job. Somebody in the HR department reads through all the applicants and selects the ones they want to bring in for an interview.

Angel financing – you fill out the angel group’s 2-3 page application for funding. The selection committee evaluates all applications and selects the 3 they want to have present at the group’s next investment meeting.

In either example, your goal is not to get the job or get a cheque. It’s to stand out from the pack and get invited to meet in person. People often find it hard to distill their company & the investment opportunity into such a short application. However, resist the urge to try over complicate things by providing all sorts of detail & information at this stage. Your goal is to look interesting enough to be invited to the next stage where you can provide more information.

2) First interview/pitch

Job search – you meet with the HR resource who tells you about the company, reviews your work experience, asks questions and answers any questions you have. After they interview all selected candidates they determine the short list they will present to the hiring manager to interview.

Angel financing – you pitch your company at the group’s investment meeting to 30-40 angels. You have about 15 minutes to do your pitch and 10 minutes to answer questions from the group. The 10 angels that are interested in your opportunity will sign-up and form a due diligence team to investigate your company further.

Again, in both examples your goal is not to get the job or cheque. It is to come off as being a strong candidate / investment opportunity so you will get the chance to have a deeper dialog with the real decision makers. At this stage you will have the opportunity to provide more details, but not enough to comprehensively review all aspects of your company. This will all have to come out during due diligence before angels feel comfortable to invest, but don’t try cram all of this information into your pitch. You want to provide a broad overview of your company/investment opportunity that looks interesting enough that people will sign-up to take the time to investigate your company in more detail.

3) Final interviews / due diligence

Job search – you meet the position’s direct manager and go through a detailed interview to assess if you have the qualifications to do the job. If you are applying for a senior position there are probably multiple interviews with different people, technical tests, reference checks, etc. After the manager is comfortable they have all the details on all candidates, a hiring decision is made.

Angel financing – you meet with the interested angels to review your company in detail. Through a period of weeks angels look at all aspects of your company, talk with other people in your compnay’s industry, talk with your customers, do reference checks on the management team, get legal advice, etc. When they feel comfortable with the investment opportunity the deal closes & you get your cheque.

This is the stage where you need to provide all details and get the deal closed.

The main take away is that during the early stages you need to properly manage your messaging so you are presenting a crisp, clear, broad summary of your investment opportunity. Yes you will be leaving out a lot of details, yes people reading your application/hearing your pitch will have unanswered questions. But your goal is to come off as a promising & interesting investment opportunity so that you will be invited to the next stage so people can ask their questions & get into the details. By trying to over cram too much information into the early stages thinking that you want to provide people with as much information as possible, you run a greater risk people will not understand what you are trying to get across and not be interested taking the time to learn more. The best early stage presentations are the ones that provide a broad overview of all important areas and get people interested to want to take the time to learn more in subsequent meetings.

In my next article I will talk about the motivations of angels who you will be pitching to. As always, if you have any questions, comments, or suggestions for future articles feel free to contact me: craig at mapleleafangels.com

As a follow up to my last post on timelines to getting angel financing, in this article I will talk a bit about how the process can be done quicker.

Recall in my last post, I mentioned the timelines were based on a scenario of applying to an organized angel group. This naturally introduced some time overhead to go through a selection process in advance of presentation to the group’s members. One way to speed things up is to try find one angel investor that can meet your initial financing requirements. You will cut down the time required to make your initial pitch as well as make the whole process of due diligence and term negotiation quicker as you will only be dealing with one person and not have to deal with many different people with different viewpoints, priorities, and schedules.

On the flipside you may not find one investor that is comfortable with focusing that much captial on one venture. Many angels prefer to invest smaller amounts across wider number of companies so they can mitigate their risk. If you do deal with a group of angels, make sure you identify a lead angel in the group that can help be your company’s champion and help keep the group focused and provide leadership to driving the deal to closure.

Also recall in my last post, a lot of the time was spent going back and forth to agree on terms and get the legal documents finalized. It goes without saying that for your company’s lawyer, make sure you have one that has done angel deals in the past, is experienced with the main investment terms used for these types of deals, and will be able to be responsive during the timeframe when required. You may be thinking, if this takes so much time, why don’t I just draw up all terms & conditions beforehand so when I present to angels I have this all completed. You can do this, however it heavily depends on your situation. If your company is viewed as a ‘hot’ deal with a lot of interest or if you already have lined up a couple of lead investors and are just looking for some additional investors to top up the round, then this may work for you. Angels may feel they need to accept your terms if they want to particiapte in the deal. On the other hand, if your company does not stand out from the other deals on the go and angels do not feel they need to take your terms and want to invest on their own terms or structure of financing, then you run the risk you spent all the time and money to prepare these documents only to need to have them extensively revised.

As I said in my last article, the best thing to do is start early and in particular start to build up relationships with people who will be able to help you during the financing process. If you take a step back, think about what you are doing. You are getting in front of a group of people, probably most of them you have not met before, and then asking them to collectively invest six figures of their personal money into you and your company. This takes a level of mutual level of trust from both sides that is going to take time to build up. I’ll talk about this in a future article.