Many angel investors state that they are temporarily pulling back on making investments into companies until there is more certainty in the economy. Some of the factors creating the uncertainty include: a drop in the Chinese stock market, an increase in interest rates, the presidential elections, Middle Eastern proxy wars between Saudi Arabia and Iran and oil prices. Angel investors that are putting money into companies are taking a much more cautious approach to their investments.
What are Angel Investors seeking in 2016?
In our opinion, Angel Investors are seeking, at a minimum, an all-star team, a company in growth mode and a clear and simple revenue model.
All Star Team
Investors most often will invest in a CEO with whom they worked with in the past – especially if there was an exit. Relationships are definitely important. Beyond that, investors want a CEO who has a track record of delivering against revenue goals. If a company doesn’t have a strong CEO, they may want to put in an advisory board of experienced executives who participate and assist with the capital sourcing initiative. Board level spots should be awarded sparingly, especially if seeking venture capital as those investment firms would want those board positions.
A Company in Growth Mode
Investors are particular fond of paying for growth. Many CEO’s often ask of a funding event, “shouldn’t I be getting a salary from these investors?” The answer from investors is a resounding no. The investment community finds especially attractive founders who contribute money, blood, sweat and tears. Funding growth means paying for revenue generating activities such as sales, marketing, business development, new customer acquisition or new opportunities. Some investors will may even explicitly state that their investment will only be used for growth!
A Clear and Simple Revenue Model
Investors want a clear and simple revenue model that builds company valuation quickly. In software, that may mean a “freemium” model or a free trial. In the healthcare space, it may be rapid adoption in a particular demographic or space. In the consumer space, it may be growth in e-commerce or in store demand. A company should understand their customer and their buying habits and then align the company with those buying habits to create a simple customer acquisition strategy that generates revenue.
With all the uncertainty in the investment community, executives should remain passionate and committed to their company. If the company has an all-star team, is in growth mode and has a clear and simple business revenue model, that company will be in a better position for an investment.
For more information about how Heritage Ventures sources capital and accelerates revenue, please contact either Cameron Ackbury at Cameron@HeritageVentures.com, Chris Wheeler at ChrisWheeler@HeritageVentures.com or Tim Shiple at TimShiple@HeritageVentures.com.