Caveat emptor! This is the Latin phrase meaning let the buyer beware. This is the attitude that angel investors have about investing in young companies. They are cautious and will want to learn as much as they can about the viability of a new business idea before writing checks to entrepreneurs. The harder you make it for angels to learn about your business opportunity, the less likely you will receive serious investment consideration. Why? Because angel investors are busy people. Most have full time jobs, sit on one or more boards of directors, and are active in their communities. They don't have time to play cat and mouse games with entrepreneurs who say in so many words, "I have a great idea but I can't tell you too much about it until I can trust you." Actually, successful fundraisers take the opposite approach to educating angel investors. They are organized, forthcoming and concise in the presentation of information. They also offer to meet with prospective angels anywhere and anytime that it is convenient for them. Here are some other thoughts. - Angel purpose. In my experience,most angels don't want to steal innovative ideas. They prefer to let innovative people like you do the heavy lifting of building abusiness while they look forward to enjoying the lucrative fruits ofyour labors. Occasionally some unemployed angel investors ask to join a management team. But this relationship is collaborative, not competitive in intent.
- Confidentiality agreements. Mostangel investors, certainly members of angel investment clubs, don't sign confidentiality agreements in order to receive business plans. It's not a good use of their time to read through cumbersome agreements that may be poorly worded and require significant editing. Angels simply turn their attention to other entrepreneurswho don't put up as many disclosure hurdles.
- Business plan content. Entrepreneurs don't have to disclose all the technical details of a new invention in a business plan, especially if the idea has patentpotential. However, all initial communications with prospectiveinvestors should be clear about a company's basic product or service; why the solution is attractive to paying customers; and the long-term profitability of providing the solution in the marketplace. These first communications should be detailed enough for angels to ask for more information.
- Competitors to fear. The moresuccessful your Web service launch, the more likely copy-cat competitors will emerge. In most cases, they will emerge from within your industry. To prepare for the competitive downside ofinitial success, study which types of online businesses represent potential competition and develop strategies to combat their ease of market entry.
- Upgrade sales skills to appeal toangels. It's helpful for entrepreneurs to pick up one or two books about face-to-face sales calls. Good sales people listen closely to their customers' concerns and learn what mannerisms and communications skills enhance the presenter's credibility and acceptance.
Remember, at one time the founders of Google, Starbucks, Amazon.com, etc. all started out with a great idea and prepared executive summaries and business plans for the investment community. They believed in their ideas and communicated their confidence and knowledge to potential investors without hesitation. You can too.
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