One flaw that a lot of potential entrepreneurs display is that of lacking investor empathy – they do not understand what a business investor is looking for. Often, Business Angels will have specialization and experience within one or two industries, as it is rare to find a jack of all trades – why invest in something you don’t fully understand? As a result, this has two important repercussions for potential entrepreneurs and businesspeople – make sure the content and value is there, and get the business angel investor to invest in the aspect of the business which has the MOST content and value – yourself or your team!
The business angel will either have a fondness for the business idea or a fondness for the businessperson – ideally both! Entrepreneurs can often highlight one, while overlooking the other – this lessens the apparent value of your idea or company, as well as its apparent potential.
This translates into having a solid image and understanding of how you and your solution are presented – how do you come across? your product? If you have an online ruby-on-rails solution for B2B publishing, you might just lose your audience. Instead, you have a SOFTWARE solution, and are as a result a SOFTWARE business. You must try to avoid giving an investor any chance of being confused, bored, or uninterested – this is doubly true when it comes to self-image.
Think about getting two emails, or proposals. While both can have the exact same content under offer – clearly presentation is key:
- alex has a idea – reading program for old people or people that can’t read . big opportunity act now! alex_footyfan92(at)hotmail.co.uk
- Mr. Alexandre Dumas has an Investment Proposal – A Unique Software Solution for Dyslexic or Aged Readers: a.dumas(at)alexis-solutions.org
It is not hard to see the difference. Angel Investors are busy people with lots of responsibility – they will often scan proposals, and are looking for the one or two that stand out. Investors coming across the first example will have a gut reaction and most likely skip it – why bother when there are much more professional looking proposals to browse?
This also works in reverse – if the business proposal is clear, professional, and interesting – it is much more likely interest will be paid to your website, your video, and your offer. If not, then even if you have a site that will blow them away, or an idea second to none, there will be no one to see them. This is important to remember; if an entrepreneur can’t spend the effort or time to write a quality investment proposal, summary, or even website – how can they be trusted to put the effort and time into a fully-fledged business?
If you fail at representing a business idea, you WILL fail harder at representing a business full stop! Let’s look at a few important points to consider when representing yourself and your business.
Google rose to fame (and fortune) by providing a new way to search. Arising from the research work done by Larry Page and Sergey Brin, its solution to the problems of internet search was vastly superior – a service with more value. However, it must not be forgotten that this was in a time with an extraordinary amount of different search engines and competition – the so-called ‘search engine wars’. The different algorithms based upon feedback connections between sites, which are the power behind Google, are not immediately apparent to the end user. Google differentiated itself by its image – this IS evident to the end user. At a time where most sites were poorly laid-out; bursting with intrusive ads, animated gifs, and ugly fonts, Google adopted a radically minimalist web design incomparable to anything else out there at the time. They married a bold image to their superior underlying technology that provided a solution. Would we still be ‘Googling’ things we don’t know about WITHOUT Google’s attention to image? They have kept an eye on image and reputation ever since, expanding this concern to its corporate image (“Do no evil”) as well as the new, equally minimalist, ‘Google Chrome’.
Establishing an identity, one that is consistent across all of your endeavors, cannot be emphasized enough – as it is sure to attract angel investor attention and carry your product or solution to success once established.
If you cannot do this yourself, get someone who can! Perhaps this is an area where an already experienced business angel investor may help; after all, they’ve been down this path themselves. The term ‘teacher’ in Japanese (‘sensei’), literally means ‘one who has gone before’ – also a perfect way to describe Angel Investors such as those found on Venture Giant!
Perhaps due to the ‘entrepreneurial revolution’ - the increase in technology, it’s usage, and those willing to take advantage of it – or simply just the potential of youth (One of the key characteristics of entrepreneurs is their willingness to try and fail – a less daunting prospect with youth on your side), more and more millionaires and billionaires are young and often, attractive. Young, attractive, and rich is a becoming image, and this presentation (managed well) often quickly leads to fame and celebrity. This in turn enhances your reputation and how others see you – including potential investors!
Allying yourself with this energy and youth is a sure-fire way to successful promotion – the effect it has on others has long been accepted within psychology and neuroscience, where it is known as the ‘Halo Effect’. It is also the reason why so many of the public faces of corporations are attractive, and why so many companies court the services of famous actors and musicians as representatives.
It’s also about building relationships – products come and go – YOU yourself remain. This is especially relevant to angel investing; you won’t develop these relationships with a bank!
The term ‘Sweat Equity’ refers to the inherent value within the work you have already done, and should not be left out when presenting to investors – it is literally the toil and sweat you have put into this venture to get it up and running!
As a rule of thumb of here about how to value your sweat equity – you should find the amount of money you have invested and add on 20%. This is fair for all parties. Make sure not to overvalue your initial investment, however, as if you do it may come out during due diligence that you have over inflated your initial costs – and this can ruin your image and credibility as an entrepreneur. So, when calculating your sweat equity, you should be distinct about how you have done this; that you have added 20% to cover your time, efforts, and funds. Any reasonable investor should accept this, as this is actual money you have invested, and is a REAL benefit for the investor – the value within yourself. Do not forget that despite the genius of their solution, the Google founders were PhD students at one of the world’s best universities. This is not a feat accomplish-able by most and yet again has value!
If the product is great, but you come across poorly, an angel investor will pass. It takes effort, charisma, and most importantly, hard work, in order to sell – having a great product or service is useless if you can’t represent it.
An entrepreneur should be the embodiment of their business or service, the more he/she exudes success or potential, the easier the journey will be and the easier angel investment and funding will be drawn to you.
Alex Potter is the Business Development Manager for the successful UK based Entrepreneur and Angel Investor matching service, Venture Giant.