How to Impress an Angel

As CEO of the Venture Alberta Forum, a group of front-line investors that has financed dozens of Alberta startups, it’s part of Randy Thompson’s job to recognize a good business pitch when he sees one. Here are a few of his tips on currying the favour of the angel investor.

by Scott Messenger

• If your idea involves an online property, forget about social networking. Completely. Facebook, Twitter and LinkedIn, for most purposes, have it covered. And no matter how many entrepreneurs come to him convinced they can reinvent Web 2.0, “It’s a version of something else that has a bit of a spin on it,” says Thompson. “That’s not good enough anymore.”
• In the absence of short-term payoffs, long-term projections for return on investment, no matter how great, are meaningless. Anything two or three years away from market validation isn’t likely to be funded. Make sure you approach the angels with some customers behind you.
• Acknowledge the fact that you have competition. No matter what you’re doing, it’s somehow already being done, so account for that. “If you’re throwing crystals into a glass of water to turn it into raspberry drink, well, your competition is water,” says Thompson. “People don’t think of the simple solutions as being competition.”
• Keep your valuation in line with what the recession has done to inflated, boom-time expectations. Optimism may be on the rise, but it’s still cautious, so be reasonable. “One of the fallouts of the economic crisis is deals are not going to be valued very high.”
• Put some of your own skin in the game. A problem with many entrepreneurs, says Thompson, is their failure to “be financially aligned with the investors.” If you don’t demonstrate that you believe in your business, and prove it with your own chequebook, why should anyone else?

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