By Matt Pierson, Managing Director at Dunn Rush & Co
It’s a great time to launch a tech business in New Hampshire! The new TechOut startup competition this month, sponsored by the ABI Innovation Hub and the NH High Tech Council, puts a spotlight on entrepreneurship, awarding $100K in total investment to three winning companies. On September 20th, six companies will present to an audience of up to 300 people, with attendees at the event voting on the third prize award. Registration to attend is now open, www.abihub.org/techout. But what comes after that first $20-50K?
Angel investors often fill the role of providing capital to companies with strong growth prospects that require $50,000 to $2 million to reach the next stage of growth or become cash flow positive. Some companies that seek angel investment may ultimately require greater amounts of capital from venture capital firms, while others will exit to a strategic or financial buyer. Of course, many will disappear altogether, reducing the investment to zero.
Angels typically are high net worth individuals with both a healthy appetite for risk and a desire to help entrepreneurs succeed. I know of few angel investors who don’t like rolling up their sleeves and helping out in the companies they invest in. By “helping out”, I mean lending their time and expertise in either informal advisory roles or as a member of the Board of Directors.
One of the reasons angels form angel groups is to tap into the collective expertise of a wider group of people, often with very different backgrounds. In general, angels within an angel group make their own decisions about individual investments versus pooling their money into a central fund.
Some tips to maximize your chances of getting an investment include:
- Have your elevator pitch down pat. Understand your value proposition and be able to articulate what your business is all about. You never know when you may be put on the spot to make a 30 second pitch to a potential investor.
- Have a concise one page written summary of your business ready to email interested parties. Most angels see dozens of plans a year, giving a cursory glance to most. Give them a reason to want to learn more in your one page summary. Charts, graphs, photos are often a better way to get your story across than straight text. Most angels will not sign an NDA at this point, so tell your story without giving away the secret sauce.
- If you’re ready to engage with angel investors, try to get a warm introduction via someone who knows them. Reach out to your attorney, the NH High Tech Council, abi Innovation Hub, SCORE or people at the SBDC you might know and ask them for a referral.
- If you’re invited to present at an angel meeting, ask what to expect in terms of time, attendees, and available A/V equipment. It’s not uncommon to have one hour, inclusive of setting up, tearing down, working out your A/V compatibility problems, etc.. This goes by in the blink of an eye! I recommend bringing a backup projector, laptop, and memory stick with your presentation, along with hard copies for all attendees.
- Know your audience. Look up the backgrounds of attendees. You may find common interests, work experience, or people you both know. Making a personal connection helps.
- Keep your presentation to no more than 30 minutes. For some reason, most of the angel investors I know have ADD, me included. Angels will interrupt and ask questions throughout your presentation! Use no more than a dozen slides. Backup slides are OK if you run into more detailed questions.
- Use one presenter if possible. Angels value the team highly and want to get to know you, but having people jump in and out of a presentation is often distracting and takes away from your story. If they like your story, you’ll be invited back for more detailed discussions.
- Angels will ask you about valuation. In your first meeting, you can be somewhat vague. The goal is to determine if you fall into the reasonable or unreasonable category, not negotiate on the spot.
- Keep your expectations reasonable in terms of timing. A typical due diligence process takes eight to twelve weeks. During that time angels will stay in close touch, learning more about you and your team, and tracking your progress. Short emails on milestone accomplishments are a good way to stay in contact and build confidence in your plan.
Seeking angel investment can help accelerate your business growth and lead to a mutually rewarding relationship. Raising money is never easy, but knowing how angels think about investing gives you a better chance of success.
About Matt Pierson:
Matt Pierson has founded and/or funded numerous start-up and early stage high tech companies. In 1996, he co-founded DTC Communications, building the company to $30 million in revenue before selling it to Cobhamplc, in 2004. In 2008, he co-founded JitterGram, one of the first companies to develop a social CRM platform for use by small to medium sized enterprises. JitterGram was acquired by the Meltwater Group in 2011. Earlier this year he was named the UNH Whittemore School of Business and Economics Entrepreneur of the Year. Matt sits on the board of numerous non-profit and for-profit organizations, including Nanocomp Technologies, the New Hampshire High Technology Council, and the New Hampshire Charitable Foundation. He is a Managing Director at Dunn Rush & Co., a Boston based investment banking firm, where he focuses on defense and technology M&A transactions. He is also a founding partner of 10X Venture Partners, an angel investment group based in Merrimack, NH.