Chris Wheeler, CEO of Heritage Ventures, answers some common questions about Angel Investors.
Q1: Should my company raise capital from institutional investors or Angel Investors?
This is a question that depends on the stage of your business. If your company requires capital more quickly, then most likely you will want to seek capital from high net-worth individuals. These angels will write smaller checks but they will also want to be advisers to your company. Angel investors will also invest in companies that may not have hit all of their corporate objectives but see tremendous upside in the opportunity.
Institutional investors will have a greater requirement that the company hits identifiable milestones like minimum viable product and consumer/customer acquisition before they invest. If a company has a proven CEO that successfully exited in the past, the institutional investor may invest even if the company has not hit all their milestones. Of course, institutional investors can write bigger checks.
Q2: How will the Angel investors evaluate my company?
Again, this question depends on the Angel investor. It is Heritage Ventures responsibility to understand the investment interest, investment process and criteria of each individual investor. In general, the angel investors will be seeking a minimum viable product that includes a product roadmap. They will also seek experienced founders who have subject matter expertise and an exit. If the company is the founders first, then the Angel Investor will look at their experience. An Angel investor will want to see customers (or consumers) that demonstrate your product is a must have (rather than a nice to have) that solves an important problem and a buying process that is repeatable.
It should also be emphasized that Angel Investors do not want to fund burn. They want to fund company growth. Presenting to the Angel investors a set of financials that show breakeven, or close to breakeven, will have a greater chance of funding than a company struggling to make payroll.
Q3: Are there different types of Angel Investors?
Angel investors also have their own unique criteria for investing in companies. Some are generalists and invest in a wide array of companies. Others will only invest in companies in which they have subject matter expertise. Understand that the clearer the product, value proposition, the more likely a generalist will invest in a startup. Obviously, the more technical the product the more likely you will need an Angel with domain expertise.
In a future blog we will go more in depth about the types of Angels including: Domain Angels, Grouped Angels, Fellow-Entrepreneur Angel, and Financial Angel.
For more information about Heritage Ventures and how we share in your risk, please contact either Cameron Ackbury Cameron@HeritageVentures.com or Chris Wheeler ChrisWheeler@HeritageVentures.com.