To really succeed at building relationships with angel groups and getting investments from them, you have to understand how they work. If you match an angel group’s investment criteria, the next step is to go through their process. But for a lot of entrepreneurs, that process is opaque. While some angel groups might provide you with a detailed written process, a lot won’t. But, in either case, there are three things you have to do to get an angel investment.
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- Secure a Champion: You will need at least one or two members within the angel group that will be your champions and promote investment in your company to the larger group. Your champions believe so strongly in you and your business that they are willing to put their social capital and reputation on the line to convince others that your company is a worthwhile investment opportunity. In many cases, your champions will also be individuals with relevant industry expertise.
- Prove Your Business Model: Every angel group will take time to review several key elements of your business to understand whether it’s the right fit. In particular, they will focus on the strength of your value proposition — are you creating a compelling enough benefit to change behavior so customer’s adopt your solution and stick with it? From there they’ll evaluate how much traction you have, whether your team has what it takes to take the business to the next stage, and whether you can raise your next round in the next 12–24 months.
- Build Investment Interest: Your internal champion will leverage the insights from the in-depth review to begin to build investment interest within the angel group in order to fund the opportunity. Since angel groups give their members the ability to make individual investment decisions, not every angel will be making an investment. In order for an angel group to make an investment, there needs to be a critical mass of members ready to write a check in order for the group as a whole to come together to make the investment.
If you’re seeking investment from angel groups, you need to focus your attention to building champions within the group. You’ll also need to set your expectations clearly; investment won’t happen in two days — you need to allow time for angels to review your business and bring together others to invest. But if you make through these steps, you’ve secured a growth-driving investment with partners committed to helping you succeed.
This post is part of the Hyde Park Angels Entrepreneurial Education Series, which brings together successful, influential entrepreneurs and investors to teach entrepreneurs everything they need to know about early-stage investment through events, articles, videos, and more. If you are interested in learning more about similar topics, register for “How to Work with Your Advisors, Board Members, and Investors” on November 12.
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About Hyde Park Angels
Hyde Park Angels is the largest and most active angel group in the Midwest. With a membership of over 100 successful entrepreneurs, executives, and venture capitalists, the organization prides itself on providing critical strategic expertise to entrepreneurs and the entrepreneurial community. By leveraging the members’ deep and broad knowledge of multiple industries and financial capital, Hyde Park Angels has driven multiple exits and invested millions of dollars in over 40 portfolio companies that have created over 850 jobs in the Midwest since 2006.
About the Authors
Michael Sachaj
Michael is the Associate Director of Hyde Park Angels. He leads HPA’s investment opportunities through sourcing deals, conducting due-diligence, and providing oversight of the University of Chicago Booth Associate team. Michael joined Hyde Park Angels after spending three years as a strategy consultant with Booz Allen Hamilton in Washington, D.C. where he worked on a variety of process and customer service improvement efforts. He earned a BA in Political Science from Northwestern University in 2009.
Alida Miranda-Wolff
Alida Miranda-Wolff is Associate Manager at Hyde Park Angels. Her role includes creating and executing marketing and communications strategies, planning and managing events, fostering and maintaining community and industry partnerships, and managing membership. Prior to joining Hyde Park Angels, Alida served as a manager, data analyst, and publication specialist at a multibillion dollar industrial supply corporation. She has led one of the most successful Kickstarter campaigns in Chicago history and worked with half a dozen startups in various marketing, content creation, and project management roles. Alida believes in creating valuable, spreadable multimedia content, and has done so as a freelance writer for several print and online publications.
PC: “Workshop Gamestorming with Sunni Brown on June 6th 2013 in Amsterdam organized by Business Models Inc.” via PhotoPin
