As a startup with ambitious goals, you’d typically source for funding externally.
Sure, it could mean a dilution of ownership, increased scrutiny and reporting, as well as a risk of vision misalignment. Not to mention that if you’re an early-stage startup, venture capital firms might not look your way at all.
That said, there are also various perks that come with it such as mentorship, industry connections, and strategic advice. In some cases, founders look towards angel investors because they’re just more prepared to take an early piece of the pie.
Which brings up the question—what do angel investors truly seek in the entrepreneurs they choose to support?
We got a peek into the minds of three angel investors during NEXEA’s DisruptInvest Summit that happened a few days ago:
- Georg Chmiel, Co-founder of Juwai-IQI Holdings
- Prashant Kumar, Founder of Entropia
- Dato’ William Ng, Chairman & MD of Audience Analytics Limited
Moderated by Brian Fernandez, Managing Director and Co-founder of BizTech Asia, here are five pieces of advice to increase your success rate of attracting an angel investor.
1. Take a sniper approach and aim sharply
One mistake that many entrepreneurs tend to make is by valuing breadth over accuracy when it comes to seeking investors. So you pitch to as many angel investors as possible and hope that one (or more) of them will hit the mark.
But the reality is that’s not the most strategic way of looking for investors.
“Don’t take a shotgun approach when you approach investors, [instead] take a sniper approach,” Brian stated. This essentially means that you should be focused more on finding angel investors that have interests in your kind of business.
While yes, angel investors do pump money into the business, that’s not their sole purpose. They’re also meant to offer guidance through their industry expertise and networking connections to grow the business further.
2. Ask yourself, do you really have what it takes?
As the Chairman of Audience Analytics Limited, William shared that he usually hears about 400 pitches every year. And most times, startups approach them with promises that their solution is able to address a billion-dollar market.
“But at the end of the day, the ultimate question I ask is, ‘How does your idea even manage to take a small slice of that pie?’ A lot of people get stuck at that point.”
It’s all fine and dandy to believe that your product and service can solve an important market problem. That is the premise of being a startup after all, right?
However, aside from business strategies, this question is more targeted towards your team’s abilities. A hundred other startups could have a similar solution, but not all of them will be able to execute it. So you have to ensure that you have the right people that can implement your ideas.
3. You don’t have to be a new-to-the-world innovation
Every startup wants to believe that they’ve come up with an idea that nobody in the world has. And to some of the lucky few, this is actually true.
But having been in the startup scene for over two decades, Prashant doesn’t think Malaysian companies fall into that category. He’s found that it’s very unlikely for Southeast Asian startups to create a product that has never been done anywhere else in the world. These out-of-the-box pioneers tend to be from the West.
As such, he advises entrepreneurs to not focus so much on being the first in the world. Rather, be the first to bring these solutions to Asia.
“We’re not looking for new-to-the-world innovations, but new-to-Asia innovations,” he reiterated. A simple example of this is the ride e-hailing app Grab, which is Southeast Asia’s answer to the American Uber.
4. You can’t copy-paste business models
On that note, it’s important to remember that the market in each area is very different. What might be popular in Thailand might not take off in Malaysia, and vice versa.
It’s usually an easier journey since a ready-made blueprint is already there and you can see feasible results. But Georg stated that, “The worst [thing] you can do is copy-paste models.”
This might provide temporary gains, but it can also create issues in the long run. For example, you might be exhausting resources you don’t have or using tactics that aren’t relevant to the present.
Not to mention the obvious, which is: What exactly are you bringing to the table and why should investors fund you instead of others?
5. Don’t glorify your results to impress
One word that kept repeating throughout the day was “integrity”. Most of the angel investors expressed how much they valued it and how it could make or break an investment.
Generally, this boils down to one question—”Can I trust this guy?”
They can branch it out even further by looking at a founder’s business traction, industry experience, and most importantly, honesty.
Startups have to compete with hundreds if not thousands of others for funding from a handful of investors. “So the temptation to glorify your results and what you can do is always there,” William said.
“It takes a very strong entrepreneur or entrepreneurial team to resist the temptation and say things as they are. If you’re not doing so well then say you’re not doing so well.”
You’d be surprised by how far being genuine will get you.
- Read other articles we’ve written about Malaysian startups here.
Featured Image Credit: Vulcan Post
