5TH MAY, 2020

Top 7 Tips For Attracting An Angel Investor

When looking to fund a new venture it’s often hard to know where to start. Some entrepreneurs try banks or family members while others avail of grants or various investors.

Working with an angel investor specifically brings its own unique advantages. They tend to have money and expertise in high abundance, and can guide you towards substantial business success. But convincing an angel investor is no easy task, which is why it’s vital to understand what exactly they are looking for from the outset. Here are some top tips to get you started.

1. Be realistic when pitching

Approach potential angel investors with a clear, concise and comprehensive description of what investments are required and over what time period. It’s also important to give an honest, up-to-date, authentic picture about how far your start-up has progressed and what its achievements are already. The investor essentially needs to understand at this point what their specific contribution will be and how it will bring about a return on investment. A thorough business plan is also strongly advised, which displays what your goals for the venture are and how you plan to achieve them.

2. Get the right team in place

What makes a business go from good to great is its people. Many start-ups pitch innovative, eye-catching ideas but lack the right people to implement them and fail to achieve funding as a result.

Angel investors are strongly attracted by inspirational founders. These are people who don’t just talk a good game but can also lead a business team to deliver the very best return possible on capital invested. Once the right people are in place, the funding is more likely to follow.

3. Give angels the opportunity to value add

Angel investors generally look to bring value to the new business, not just financially but in their ideas, experience and contacts. They are also looking to diversify their portfolio efficiently. Angel investors may therefore take an active interest in the business, either in an advisory capacity, network introductions, mentorship or by being on the board of directors. They’re also often very helpful in making key strategic decisions, such as raising additional funds and leadership team hires.

4. Prove your worth

Before large amounts of capital can be injected into your start-up, you need to know whether your idea and your business are realistically viable. Crowdfunding is a very effective way to prove your concept in the market and gauge public interest. Angels and venture capitalists often use it as a filter to decide if a start-up looks promising, so setting up a crowdfunding campaign early on is well worth considering.

5. Be passionate

This might seem like an odd one when you’re going for a professional “strictly business” kind of look in your pitching, but potential new investors want some fire in your belly. They’ll need to see your figures and your research, and to be convinced that you’re taking this venture seriously. Your new business is your baby! So be proud of it, show it off, and ooze enthusiasm.

6. Learn from set backs

If an agreement unfortunately doesn’t materialise after you’ve pitched to an investor, take time to analyse why that might be. Do you think your ideas were well received generally? Are you asking for too much, or does your pitch need a polish? Only by doing this can you work out how to improve next time and hopefully achieve the partnership you’re looking for.

7. Have an exit strategy

Angel investors know that their money is much needed and will be of a high amount. They also know what kind of return on investment is realistic – and so should you. The exit strategy is your chance to highlight what a likely exit looks like for investors, when it should occur, and what type of ROI can be expected. A key mistake that some entrepreneurs make is in neglecting to remember that investors want the maximum investment possible. They also want to know when they’re going to get it!

Once you’ve set your new business up, you’ll need to grow

Only by growing and innovating can your fledgling business stand the best chance of surviving and thriving long term. However, the research and development (R&D) that innovative activities require can be expensive, meaning many businesses start to struggle.

The good news is there are a variety of government-backed financial assistance schemes available, including R&D Tax Credits and R&D Grants.

How do they work?

R&D Tax Credits work by allowing companies to receive a reduction in their Corporation Tax to reflect their R&D costs. The types of projects and costs are hugely varied and the scheme is open to all companies of any size and in any sector. Even loss-making companies (which many start-ups will be initially) can claim by receiving a cash lump sum instead. It’s a generous scheme too, worth as much as 33p in every £1 spent on R&D.

Then you’ve got R&D grants. These are offered in the format of a competition where UK-based businesses can pitch in the hope of being selected. Innovation grants are typically awarded for things like early feasibility studies, collaborating with other organisations, developing new products or services, or for improving existing ones.

Grants can range between £25,000 and £10 million and can be awarded as long as innovation is taking place. You can find out more on our R&D Tax Credits and R&D Grants webpages.

Start Your R&D Tax Claim today with Tax Cloud

If anything we’ve mentioned sounds familiar or you’d like to ask a question, please feel free to contact us today on 0207 360 4437. Our expert team are on hand to explain everything in plain English, potentially saving you a large amount of money, time and hassle.

Our Tax Cloud portal is also great for guiding you through the R&D Tax Credits process too. It allows you to enter your own figures and see how much you could claim, before guiding you through your personalised claims process. The financial boost could well be worth more than you thought!

Barrie Dowsett, ACMA, GCMA
Author Barrie Dowsett, ACMA, GCMA CEO, Tax Cloud
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