Angel investment is one of the more popular routes that startups are taking to secure their first external funding, as they come with many advantages.
However, pitching to an angel investor requires its own set of preparation. What are the things you should keep in mind to craft the perfect pitch? What are angel investors looking for?
In order to answer these burning questions for the startup community, e27 sits down with Eddie Ler.
A former World Bank consultant and angel investor, Ler has invested in pre-seed and seed stages of an enterprise and consumer tech startups. In his experience as an angel investor, his portfolio ranges from micro-mobility, sharing economy, SaaS platform, data analytics, and fintech. His investees have subsequently received backing from G7 sovereign wealth fund, listed investments firms, early-stage VCs, and family offices.
He explains the nature of angel investing –and why it can be tough.
Think big but start small
From the perspective of Ler, angel investing is more about backing the founder rather than the business idea. While he looks at the market risk and technical risks, it ultimately boils down to the ability of the founders to think big but start small.
Founders who move fast and demonstrate early traction with a path towards inflexion point will be interesting.
Market risks are all about how the product will fit in the market in the present and the future. Technical risks answer the question of whether the idea can be developed while founder fit refers to whether the founder fits well with the idea.
After making a holistic judgement based on the three risks, the next step is usually taken.
Spotting the “wannabe” entrepreneurs
In Ler’s opinion, a part of angel investing is also about finding the right startup founder. According to him, entrepreneurship is seen as a trend, a “cool thing to do.” What can be more impressive than having the title of founder or co-founder on your business card?
This makes it even more important for angels to distinguish the wannabes from the real deal.
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“Personally I look at how passionate this individual is, and whether or not he or she has a chip on their shoulder. Or in other words, if they are looking for something to prove. If entrepreneurs chase money, they won’t be successful,” he says.
Other than that, Ler also takes note of a founder’s energy level. This means that it is not the amount of experience that he is looking for in a founder, but rather the curiosity and the wit to enable them to get ahead of competition and trends.
“A 20-year experience does not matter. Tech moves fast,” he asserts.
When asked if the startup team would be an important factor to consider while seeking funding, he replies saying that the team “is never a perfect team during an angel phase.”
Unfair advantage
Eagle-eyed angels are quick to notice whether the founders have an unfair advantage. This means, apart from a great idea and a passionate founder, a startup also needs another factor that can put it ahead of the game.
This unfair advantage is usually in the form of a strong network of connections.
“A lot of times, you can’t put things on a pitch deck. To know about unfair advantages, I usually like to have a conversation with the founder,” Ler continues.
In order to put things into more perspective, he gives us the example of the infamous novel-turned-movie The Lord of the Rings.
“While the wizards, archers and warriors had powerful skills of their own, they could not solve problems all by themselves due to historical reasons. It turned out the small hobbits had the unfair advantage of being neutral, nimble and stealthy which was the missing link. They were uniquely qualified to kick off their epic journey with helpful characters in the story.”
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While Ler makes a clear point that different angels think differently, this is generally how an angel investor would decide if you are the perfect fit for their portfolio.
“You never marry the first person you meet. Just like dating, when you complement each other, you’ll know it,” he ends with a joke.
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Image Credit: Jonathan Borba
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