ENTREPRENEURSHIP / JUN. 03, 2014
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What it Takes to Win The Digital Angel Investor

After hearing a few people talk about how the Angel Investing scenario has changed though out the years. I decided to do some researcher on the pitfalls and moment of sheer genius of Entrepreneurs while making their elevator pitch.

Some may have heard the term “Fake it To Make It”. This is no longer true when you try to raise capital for your start-up. Today’s Digital Angel Investor have many tools to help them navigate through your idea i.e. AngelList and LinkedIn to tools such as TrackMaven, Compete or Alexa, an angel can quickly learn an incredible amount about your startup, your competitors, your network, and your traction. AngelList has done for deal flow what Facebook did to keeping you connected with your friends.

Digital angels for the most part have made their money as founders or VCs with high-growth startups, namely ones that made heavy use of the Internet. They understand the significant uncertainty inherent in high-growth startups and prefer to build diversified portfolios that give them ample leeway. They’ll probably start by writing you a check for a lot less than $100,000, and only after you’ve proved your “traction.” will they think about investing more on your product. This doesn’t mean this is true for every single Digital Angel Investor, but for the most part it is known to be true.

What it takes to win

So, what do you have to do get investors to believe in your product and give you money? There are some standard rules of thumb that can help you move forward with raising capital outside of family and friends.

  • Product. You need a product that solves a clear, compelling preferably day to day problem for a well-understood target customer. If you can’t explain the customer, their pain, and your solution in a few simple sentences, then you’re not ready.
  • Capital Efficiency. You need to show that you know what you are talking about with and a forward plan in place, which clearly shows you, can build an operational business for a reasonable amount of capital. If you’re a consumer-facing mobile or web app, then that’s probably well less than $1 million. If you’re selling to enterprises in a complex industry, it may be a bit more.
  • Revenue Model. Probably one of the most important things when making your pitch. You need to be able to explain how you’re going to make money.
  • Distribution. You need to explain how you plan to reach your target customer in a way that makes economic sense given your revenue model
  • Team. You need a team with the key skills necessary for success but no more. You need key functional skills. If you’re operating within a complex industry, then you also need domain expertise. If you’re planning to create a device and app for measuring Oxygen levels when exercising, then someone on your founding team needs to know a lot about fitness.

The most important part is keeping in mind why you believe your product is interesting, and making sure you are targeting the right Digital Angel Investor, and most importantly lets’ not forget you have the same access to many of the same tools as angel investors. So, use them to your advantage to do your homework, and make the pitch needed to fund your project.

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