Starting a conversation with a familiar angel investor: Play it by the ear or prepare for it?
Raising funds from family or friends ought to come with a rule book of approach. Or not?
Angel investors are unique. Sometimes, they are more than passing acquaintances of founders. They could have a filial, friendly, or even formal business relationship with the founders. In other words, there is an existing connection between the two—the founder and the angel investor. This can provide a more favourable context for communication and conversation. A bonus to this mix is that most angel investors also fly the cape of successful entrepreneurs, possessing the capital and experience sorely needed by these founders.
Now, raising capital from angel investors is a common, global phenomenon and one of the most popular ways to get a start-up off the ground. Every founder is expected to observe a few basics before they decide to search for funding from any source, angel investors included.
But does the fact that these individuals [angel investors] are no strangers to the founders change things? Before approaching them, do founders take into consideration the existing relationship between them? Do the passions, interests, traits, and attitudes of these potential angel investors come into play? Or do the founders have a plan, a pitch and approach them as they would any unfamiliar individual or an angel investor network?
Read also: The Angel Investor
We think this process should come with a sort of rule book for founders and have put together a few things founders should bear in mind to make this conversation productive, rewarding, and worth repeating many times over:
Review the relationship: Reflect on previous interactions with the angel investor. Take into consideration any earlier communications and/or meetings and the nature of the relationship. An understanding of the history will help founders to set the tone for the impending conversation.
Be transparent: Honesty and transparency are crucial when speaking to investors. Founders should be clear about their business goals, challenges, and progress. This will help build trust and credibility with the investor.
Be prepared: Founders should approach familiar angel investors like they would any other potential investor of their business—prepared. This means having a well-researched business plan, financial projections, and a clear understanding of what they want from the investor.
Be specific and clear: Is it funding or support or both? Founders should be precise and clear on what they want from the angel investor. For instance, if it is funding, specify the amount, the terms (if applicable) and how the angel investor can be involved. Highlight the potential benefits and returns they can expect from committing funds to the venture.
Read also: African or Western, are Angel Investors Alike Everywhere?
Listen to feedback: Remember from above, angel investors not only bring money to the table but also knowledge and a wealth of experience. Feedback from these individuals would be gold nuggets to founders who should ask as many questions as possible and be open to suggestions.
Be respectful: It is easy to take the familiar angel investor for granted, given the existing relationship between the two, but founders should be professional and respect the investor’s expertise and time. Thank them for both.
Follow up: After founders have approached these potential angel investors who also happen to be known to them, what next? Follow up. This is a crucial step to building a lasting relationship with said investors. Send a thank-you note, with a recap of the key points and any action items discussed. Maintain regular communication to keep them abreast of progress, and address any additional questions they may have. These little acts will show character, help build trust and improve the possibilities of future funds from the investor.
In the end, an existing relationship with potential angel investors might tilt the odds heavily in favour of founders. However, the investors should be treated with no less respect, professionalism, honesty, and preparedness due any other investor.
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