Angel Investors from the Entrepreneur’s Eye: Sourcing

“Sourcing is evaluation”

This is my first blog in this series about angel investing. I’ll be honest, I just began reading Winning Angels: The Seven Fundamentals of Early-stage Investing by David Amis and Howard Stevenson. When I ordered the book, my first thoughts were, “Investing? How will I apply this?” and “What am I about to dive into?” However, as I read the first few pages and moved onto the section about sourcing, I quickly realized, “Hey, if I am going to be an entrepreneur and possibly even look to investors at some point, it might be a good idea to understand how the other side works and thinks.” If anything, it can be highly valuable to understand how things work from more than just one perspective.

As someone who just started a business, the question of where to get additional money if and when we need it has undoubtedly been something that has crossed my mind. To start, my business partner and I put our financial capital alongside money borrowed (with interest). While we do not need massive amounts of money at this stage, we cannot be sure where this journey will take us. Perhaps one day we will need to expand beyond our space, maybe we will have to look for a new building, or hopefully we are so successful that we want to open new stores in different locations.

“It’s okay to be stupid, just don’t be uninformed.”

I am finding that there are several recommendations made in the book that even those who are not considering investing, can find applicable. In this particular section, there are several suggestions given to potential angel investors about how to get their name out there as well as lots of public relations pointers. Some of these I want to apply in my entrepreneurial life. One thing is for sure: whichever way one looks at it, good things take lots of networking, effort, time, and knowledge. I believe it is essential for us as entrepreneurs to understand what it is that angel investors are looking for in the person behind the startup.

Angel investing in itself is a very interesting multi-layered concept and process. For now though, I will focus on sourcing and entrepreneurial self-awareness. According to Winning Angels, sourcing is the first step in the process of making early stage investments. Sourcing, simply put, is the way that investors can find which start-ups they want to involve in their investments. Research, digging for information, and gaining knowledge of what they are diving into is a massive part of this portion of the process. They want to know if the entrepreneur’s startup is a reasonable investment, but they also want to understand the person behind the venture (Amis & Stevenson, 2001).

“The entrepreneur is the first key to a winning early-stage investment”

What do we as entrepreneurs need to know? As an entrepreneur, it is critical to have what potential investors are looking for in an investment. They want to feel that they can work with you, that you will listen and want to learn, and that you are honest, hardworking, and have an attractive personality. Unsurprisingly, having a reputable network can really help an entrepreneur get a look from potential investors. Entrepreneurs should also have a solid business plan and a clear understanding of their business and their industry. It is also essential that you understand what role the angel investor will play and what amounts they are typically looking to invest in startups. Forbes contributor, Richard Harroch, wrote an excellent piece on The 20 Things All Entrepreneurs Should Know About Angel Investors. I would certainly recommend you click on over and get a feel for the points that he discusses. He states that entrepreneurs can be optimistic when it comes to raising capital from angel investors as more and more individuals are interested in the concept and in supporting early-stage startups (Harroch, 2015).

Amis, D., & Stevenson, H. (2001). Winning Angels: The Seven Fundamental of Early-stage Investing. Pearson Education Limited.

Harroch, R. (2015, February 5). 20 Things All Entrepreneurs Should Know About Angel Investors. Retrieved from Forbes: https://www.forbes.com/sites/allbusiness/2015/02/05/20-things-all-entrepreneurs-should-know-about-angel-investors/#4343a0abc1aa

 

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Jill Thompson
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Natalie,

Great blog and I love the personal approach. The 20 Things All Entrepreneurs Should Know About Angel Investors that you linked to in the blog is great information! Being prepared is key and showing that you’ve done your homework is critical for investors. I agree the Winning Angels book helps entrepreneurs see through the eyes of investors. These ENT courses are also helping us prepare for these types of presentations. Some of the people I’m met with recently, that I know you have also connected with, are great resources to help make sure entrepreneurs are prepared for these pitches. Jill