Ask SCORE: How to pitch an angel investor

Pitching an angel investor can feel a bit like a catch-22. You need angel funding to grow your business. Yet, the angel investor wants to see, among many things, the growth and success you’ve already secured.

If you’re like most business owners in pursuit of angel funding, you don’t have years of sales to demonstrate growth. That means that what you’re really pitching is your “big idea” and your ability to turn your growth potential into real profit.

What it takes to secure angel funding

Behind that big idea must be a sound business strategy. With a solid business plan, you need to demonstrate that your business offers a desirable product or service that will generate revenue — and that investors stand to make a healthy return on their investment in you and your business.

In other words, it’s your job to prove that the juice is worth the squeeze.

So, what does a pitch to an angel investor look like? And where do you start? Here are five tips for pitching an angel investor.

Perfect your elevator pitch

Your elevator pitch is a description of your “big idea.” It clearly and succinctly communicates the problem you’ve identified and how your business solves that problem. It should get people excited about what you do…and excited to be a part of it!

Be passionate about your “reason why”

Remember that angel investors aren’t just investing in your company or your idea. They’re also investing in you. They’re betting that you’ll have the passion and drive to overcome the myriad obstacles that will be thrown your way as you grow your business.

There’s a reason why you got into the business you did versus every other option you had. Share that reason with potential investors and let your enthusiasm shine through.

Clearly explain the business opportunity

An exciting idea is one thing. But knowing how you’re going to find customers and drive revenue is where the rubber meets the road.

Any angel investor will want to go beyond the idea and dig deeper. Be prepared to explain the potential size of your market, why that market needs your solution, where you see the market headed (will tastes change…will attitudes shift?) and how your business compares to the competition.

Painting this picture not only shows potential investors that you’ve thought through your business strategy but that you have unique insight into your market.

Know your numbers

How much of an investment are you asking for and how will you use it? Angel investors want to see that you’ve thought through your funding request and have a detailed plan for how you’ll use their investment.

Present an exit plan

Don’t forget that angel investors take on a lot of risks when they invest in you. It won’t matter how excited they are about your business without a clear way to make money. And that means you need to have an exit plan.

Angel investors want to see a clear path to a healthy return on investment (ROI). Usually, that’s going to happen in three to five years when your company is sold outright to a competitor, goes public through an IPO or raises venture capital at an increased valuation.

Obviously, you can’t predict the future, but you need to present scenarios under which your investors can cash out and realize a substantial return.

A SCORE mentor can offer advice on how to pitch an angel investor

Have more questions? Reach out to SCORE for free, expert mentoring and resources to guide you through your small business journey. Visit score.org/stlouis to learn more.