“I encourage you to remember that angel investing is a high-touch, personality-driven activity. Success with angel investors requires more than just a great idea. It requires creating an emotional hugging relationship. Angel investing is truly a high-contact sport,” explains Brian Cohen in his new book What Every Angel Invest Wants You To Know (McGraw Hill, $30).
Angel investors are people who, using their own money, provide 90% of all early-stage startup capital to new businesses and receive a percentage of ownership equity in return. As chairman of the New York Angels and the first investor in Pinterest, Cohen is one of the most engaged angel investors out there today. In his book, co-authored by John Kador, he takes the reader on a step-by-step journey through the world of angel investing.
Here are some key insights from the book:
Investor raising vs. money raising—“It’s the smart money that really helps you. It’s your choice about the investors who will provide the money, as well as everything else a smart investor offers a startup over the course of its development,” Cohen maintains. The right investor can provide counsel and contacts.
Planning the “exit”—The only way an angel investor makes money is when the company is sold or “exits.” Therefore, angel investors are always looking for startups with a well-defined exist strategy.
Savvy startups know their customers—Entrepreneurs who most impress angel investors are the ones who deeply know their customers. They have done the research and have studied the demographics: age, gender, lifestyle, income, shopping habits, brand preferences, etc.
Making a great pitch—Entrepreneurs usually have about 15 minutes to pitch their businesses. Cohen advises, “Start by telling us what you propose to do, why you propose to do it, and how you propose to do it…include touchstones or points of reference that we can relate to. Perhaps the most important touchstone is a reference to a customer who has validated the product. Include actual—not anticipated—metrics like sales figures or cash flow.” Never shoot from the hip in answering questions, and never make typos, misspellings or mistakes.