DO YOU WANT TO SCALE YOUR BUSINESS?

How to Pitch Angel Investors Your Startup

By Kristoffer Quiaoit

Why Do Angel Investors Invest in Startups?

If you are looking to raise capital, angel investors are an option for funding your food startup. There are several reasons why angel investors choose to fund new businesses despite the risk.

These can include unexploited market opportunities, a potentially scalable business model, proven sales performance, disruptive products, and the opportunity to diversify their investment portfolios.

In this guide, we’ll explore how to fund your food company through angel investors. You’ll learn how to identify key groups, and break down your outreach process to family, friends, and angels. Ultimately, we’ll inform you how to find and pitch angel investors.

Need Help Pitching Angel Investors?

That’s what we do here at Crowdcreate. We’re rated one of the leading marketing agencies and have helped with some of the most successful companies in the world. Book a call with our team to learn more. We can help you connect with Angel Investors for your startup.

Who is an Angel Investor?

Angel or “seed” investors are individuals who provide financial resources to early-stage startups. Because of the higher risk involved during the early stages, angel investors typically allocate less than 10% of their portfolio to support rising entrepreneurs.

Angel investors may be other full-time investors, successful entrepreneurs, corporate or business people, and informal investors looking to diversify their income streams and support growing startups.

Investing in early-stage startups implies a higher risk for the seed investor. However, if successful; the investors can gain great returns. Because many angel investors have been entrepreneurs themselves, they like to contribute their knowledge and experience to developing startups.

Possibly, angel investors may have an accreditation defined by the Securities and Exchange Commission (SEC) as:

An individual who has a net worth of $1M in assets or more (excluding personal residences),
Or an individual who has earned $200k in income for the previous two years, or has a combined income of $300k for married couples.

Although angel investments are often overlooked and considered informal, it’s one of the most reliable ways for entrepreneurs to access capital for their startups. Brian O’Connell and Benjamin Curry from Forbes reported that as of 2017 angel investors put approximately $25 billion into 70,000 companies.

From my own experience, funding through angel investors was a viable alternative. When looking for capital for my previous company Nui, my co-founder, and I raised close to 180K in equity and approximately 500k in debt from family and friends and a local angel investment fund.

Difference between Angel Investors and Venture Capital

If angel investors acquire equity in exchange for their capital, how are they different from the venture capitalists?

Angel investors have more risk tolerance by funding the startups in their early stages, while the venture capitalist appears in the picture when the business has proven market traction and customer validation.

Generally, venture capitalists are more risk-averse and they abide by principles of growth and performance as they evaluate their potential investments. Venture capitalists are usually members or founders of venture capital firms with a larger capital pool. So venture capitalists can often invest a higher sum in your startup.

On the other hand, the angel investor may be an individual or a part of an angel investment group. However, their investment capabilities might be limited if your food startup scales and requires larger cash injections for continuing your business operations.

Angel investors may or may not provide advice for your startup, depending on your contract or agreements. Because many seed investors are seeking to diversify revenue streams on the side, they often limit their help to financial support.

Instead, venture capital firms might have a major involvement in setting the startup’s management and overall strategy. The goal for venture capital firms is to sell the business in the long term.

If you are still unsure, you can read more about how to find investors to raise capital for your startup funding here.

What Percentage Do Angel Investors Take?

Angel investors typically aspire to take anything from 20 to 50 percent, according to the Angel Capital Education Foundation. However, the percentage stake your seed investor takes will depend on the negotiation terms that both parties agree on.

Entrepreneurs often debate whether giving up their equity for more capital is a fair or a “good” idea. As another option, startups can also take debt financing from angel investors or they can also offer SAFEs (Simple Agreement for Future Equity).

Again, choosing equity or debt or SAFE will depend on how you perceive opportunities and risks for your business. As you consider debt over equity, some key questions we advise you to consider are:

If you receive equity financing:

Who’s investing? Do you want them on your team as stake owners?
Do you have structures in place to comply with state and federal securities laws and regulations?
How are you planning to manage periodic communication and consensus?

Learn about equity funding alternatives here.

If you receive debt financing:

How is that debt going to be serviced?
Do you have the structures in place to pay it back?
Are you assuming insolvency risk per your cash flow projections?

If you receive SAFE financing:

Who’s investing and are they adding any other value other than money to your business?
What do you plan your next round of funding will be and at what valuation?

At an early stage, higher equity or interest could be demanded as you are promising shares in a business that may have question marks around. At the same time, you are offering an opportunity that could result in accelerated profits. Ultimately, the stake that angel investors take will come down to your negotiation skills.

Join Crowdcreate’s Newsletter to learn more about raising money for your startup.

How to Pitch an Angel Investor

We know that pitching an angel investor can be intimidating and scary. It’s not just another presentation. It’s your family, your friends, and your credibility that are at stake.

There’s a lot of pressure … you don’t want to fail, you feel you can’t fail them. At the same time, you also believe in your ideas, your product, and your team. You need that cash!

Outreach Potential Investors

Pitching an angel investor occurs way before your presentation starts. The outreach process is crucial to have enough angel investors to listen and consider your business pitch. What are the fundamental factors that we integrated throughout our outreach communications:

Share your Pitch Deck & Story: What you’ve been up to, what you are creating and why you did so. What motivates you and how are you showing commitment to the business?

Highlight the Problem in the Market: What’s missing right now for you to continue fully developing the business.

Showcase your Opportunity: The request should occur for the potential investor not as a command or a desperate necessity, but instead as a unique opportunity. You can include information you have gathered from past sales, the customer validation process, and market research.

Make a Direct Request for Funding: Ambiguity doesn’t serve any purpose. You want to make a straightforward request and let the potential investors know why you are contacting them.

Invite them as Heroes by being Investors: Humans are driven by other motivations besides money. When making your request appeal to their esteem needs for respect, recognition, status, and freedom. Encourage the angel investor to become the angel or the hero of your story.

Learn how CrowdCreate has helped other startups launch their project through investor outreach.

“I think a great brand story is what really resonates with the judges and audience so tell your story well. Be authentic, be yourself, and know your why.” Hector Saldivar comments on how his Brand Tia Lupita takes home the Grand Prize win at Natural Products Expo West Virtual Pitch Slam

Planning your Pitch: Depending on the time slot given, you might have between 10 and 15 minutes. An informational but concrete presentation is always preferred. Anticipate the questions or objections that your seed investor might have.

Also, if you have non-accredited investors you are required to include disclosures to acknowledge that as angel investors they are assuming risk and they can lose money.

Address the crucial answers and the possible counterarguments that your investors can come up with. Here are the cornerstones a pitch deck should include:

Key Elements of a Startup Investor Pitch Deck

Problem: What problem or gap did you identify?
Solution: What product or service did you create? Can you provide a demonstration of the product or service?
Past Performance or Traction: What have you accomplished in terms of sales or proof of concept? What have you learned from early versions of the product?
Backers: Who is currently supporting your business?
Market Overview: What are the market size, industry trends, and opportunities?
Vision: What do you envision for business development and long-term growth?
Customer Profiles: Who are the people that love and back your business? Why do users care about your product or service?
Business Model: How does your business generate, deliver, and capture value?
Competition: Who are the key players in the market you aim to serve?
Competitive Advantage: What is your startup’s key differentiator?
Key Milestones: How do you plan to scale the team in the next 12 months?
Team: What relevant domain experience does the team have? Why is the team uniquely capable to execute the company’s business plan?
Strategic Partners: Who can support your business fulfillment externally?
Current Offering and Use of Precedes: How much do you need and for what?
Investment
Benefits: What are the compelling reasons that can attract your investors?
Long-Term Opportunities: Unexploited markets? Other underserved customer segments? International expansion? What are other key features you plan to add?

Pitch Deck Example Here

Practice your Startup Pitch

An immaculate execution is not required and most likely you will get nervous. What can you do to reduce, suppress or even eliminate that anxiety?

Practice Lots Beforehand: Having your pitch script down and feeling confident in knowing what you will say will let you focus on connecting with your audience.
Anticipate the Unexpected: What questions can investors throw at you? Create a consistent plan to back up the information you are providing and foresee their reasoning for the adjacent questions that may arise.
Polish your Performance: The business pitch involves more than the script. The investors might be looking at other elements of the presentation. As they say, the devil is in the details.
Being on time and having impeccable samples or product demonstrations could infer your professionalism. Recreating a confident tone, voice inflections, and eye contact are crucial.
Concise points on your slides, easy-to-grasp graphs, plus relevant and memorable imagery can put the cherry on the top of your business pitch. As you start to perform the pitch, pay attention to what works and what doesn’t.

If you are still unsure about how to elevate your pitch and excel in your investor outreach, you can schedule a consultation with Crowdcreate’s network of startup experts here.

Looking for a Angel Investors for your Startup?

That’s what we do here at Crowdcreate. We’re rated one of the top investor marketing agencies and have helped with some of the most successful companies in the world.

What makes a great pitch?

Performing your Pitch

The investor should be able to finance your ask and it’s not impossible to fund your request. Your ask should align with the angel investor’s purpose and your entrepreneurial skills.

There has to be a clear path to fulfill your vision. And lastly, an opportunity that reflects what’s happening in the key external factors that affect your business.

Team Work Make the Dream Work

The investor can see a team that shows they can carry out and execute the plan. Ideally there is more than one founder. They want to know that you can work with other people; if it’s just you, they’ll wonder how you can execute all the work that must be accomplished.

Future Projections

People are investing in the future with revenue projections. What can the exit look like? What does the valuation look like now and what does the future could be like?

Comparables

How do similar and succeeding businesses in this industry look? So that your idea doesn’t come across as a “dreamland,” what’s a benchmark or industry standard that seed investors can look to emulate as they enter and exit your deal.

Energy Wins

If you don’t believe in your product, who will? Investors must perceive the work you’ve put into this and the optimism that you have for it. If you aren’t motivated, if you are uncertain or pessimistic; what can you expect from the investors?

Where to find angel investors?

You might be able to find your first angel investors in your contact list, in your nearby communities, or at consolidated angel groups. You can find food founders who have recently exited who now have a lot of personal capital waiting to be invested. They can also provide additional expertise and access to resources for your food startup.

Here are some ideas of where you may find more:

Looking for a Angel Investors for your startup?

That’s what we do here at Crowdcreate. We’ve rated the #1 Investor Marketing Agency and have helped with some of the most successful companies in the world.

Hire an Investor Marketing Agency

Engaging angel investors in your business pitch can help your food startup with a “kickstart” and give you access to growth opportunities. This type of funding can be an excellent way to raise capital if you are at the early stages of your business cycle.

Preparing for the pitch itself and addressing all the concerns that seed investors may help you explore, discover, change and iterate your business plan.

Your business pitch will evolve with your business needs. Therefore, excelling on your business pitch and continuing requesting from potential investors is a learning experience that will fuel your entrepreneurial skills overall.

There are millions of investors, including accredited investors, and qualified purchaser groups, that you can access through Crowdcreate.

Learn how CrowdCreate has helped startups raise capital, find investors, and market their startup project.

Author

About The Author

Kristoffer Quiaoit

Kristoffer Quiaoit is a Shark Tank alum and Co-Founder of Good Journey Donuts, a low sugar and keto friendly donut company. His mission is to empower amazing human beings to be happy and healthy.

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