Different investors will examine a business plan in different ways, look for various types of information, and have various expectations for the data that should be provided. Additionally, different weightings of the criteria will be used to determine whether to move forward.
What Are Angel Investors Looking For?
A Strong Return: Angel investors want to make more money than they would on the stock market, but they also take on a lot of risk in order to achieve this goal. In 2017, only 40% of angel investment exits gave investors more money than they had put in.
A Good Reason to Invest: There are three main types of angel investors: the hedonistic, the altruistic, and the economic, and each has a different motivation for investing. An altruistic angel investor may be more concerned with aiding his or her community, in contrast to a hedonistic angel investor who is more drawn to the thrill of developing something novel, disruptive, or entertaining. Economic or business angels typically invest in more businesses, play a more active part in the businesses they invest in, and as a result, generate better profits. 3 Across the board, angel investors are drawn to the excitement and challenge of starting new enterprises, so understanding their past investments is essential to wooing their interest.
A Strong Management Team: When seeking to attract investment of any kind, strong leadership is essential. Angel investors expect proof that a business will succeed as they are genuinely supporting the individuals who make a business feasible.
A strong business plan: A solid and strong business plan is required by angel investors. It should include financial predictions, thorough marketing strategies, and information on the target market. They want to see a well-developed vision that contains information on how to expand the company and maintain its competitiveness.
The Possibility of Active Participation: Many angel investors anticipate spending their time actively supporting any venture in which they invest. This could be accomplished by serving on the board of directors, working as a mentor to the company’s leadership, or actively managing the business.
A viable exit strategy: It is something that angel investors demand to be provided with before any money is exchanged, along with a thorough risk analysis for each. Even the most patient investors, who actively seek out and handle long-term investments, need to know how they’re going to make a profit and expect to be paid out in a specific order.
To summarize, Angel investors are generally looking for groups that combine professionalism with a strong sense of personal commitment to the product. Angles will want a business strategy, time to conduct their own research, and a valuable interest in the companies they risk their money on because no two investments are exactly alike.
What Are Venture Capitalists (VC’s) Looking For?
Venture capital funds are more worried about the market risk, which is the risk due to unanticipated conditions of competition affecting the size, growth, and ease of access to the market.
Entrepreneur/Management Team: The entrepreneur’s background, expertise, and track record; their personal traits (such as commitment and excitement); and the management team’s breadth of abilities and functions
Strategy: The overarching idea and plan for the company.
Operations: The structure of the company’s manufacturing and delivery processes.
Product/Service: The characteristics of the product or service, including their concept, distinction, originality, and innovation. Additionally, it takes into account the item’s functionality, versatility, and aesthetic appeal as well as its quality, standards, and performance.
Market: Its potential and growth, its demonstrated requirements, its level and type of competition, and its entry hurdles.
Financial facts: This is divided into three categories: the business’s financial structure (such as costs and pricing, revenue stream estimates, and value of stock), the company’s worth, the expected rate of return and potential exit strategies.
Investor Fit: Investor fit is comprised the investor’s preferences (i.e., is this an industry, market, etc. that the investor wants to be in?) and the relationship between the investor’s background, talents, and understanding of the industry, market, technology, etc. and the investment opportunity.
Business Plan: The complete document/plan.
A business strategy must first be written before reaching out to investors in order to acquire funding. The investor’s primary instrument for assessing the prospects for the business is the business plan.