Five Things Every Entrepreneur Should Know About Angel Investors
caycon.com
caycon.com
A complete business plan is always required...All professional investors know that entrepreneurs who start a business without a written plan almost always fail.
That's not true at all! There's a difference between writing a 30-page business plan (useless) and having a solid plan of how to build the company. Especially for angels, having a huge business plan will not help.
If you need more [than $1MM in capital], you need to focus on venture capital territory.
This used to be true. But today, with the emergence of the abundance of angels, super-angels, and AngelList, this is no longer true. This is one of many big disruptions in venture capital financing over the past few years.
Your fifth-year revenue projections better be between $20M-$100M.
The best angels I know don't care about fifth-year revenue projections. It's hard enough to estimate what the company will be like in 6 months. A fifth-year estimate is useless. Only when you start to raise Series A financing from an institutional investor do these figures start to matter.
Rules of thumb include an opportunity projection that exceeds a billion dollars
Again, for angel investors, it's a completely different situation. For institutional firms, they want to own 30-40% of your company, and want you to aim for the fences in order to get the necessary returns. For angel investors, a $20mm exit is a nice return. It's still acceptable to raise an angel round and get an early exit.
Certain business sectors have historical high failure rates and are routinely avoided by investors...food service...gaming...
There's some truth to this, but we're seeing a lot of innovation (and funding) in companies that experiment in these areas. Look at ZeroCater and Gooble for food innovation, and the entire social gaming industry.