This is the third and final part in the series on Angel Investing. Now that we've reviewed some of the key ways to attract angel investors along with their key financial requirements, this last part in the series will review what to expect once they have agreed to invest in your company.
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The angel investing process takes 3 – 6 months on average from the time that you first present your pitch to actually getting your check, however, the length of time is well worth it if you are able to raise the capital you need to scale your business. Angel investors want to know who you are. Expect many back and forth meetings, dinners out, and more. Many Angel Investors will do a background check on you and the management team. After all, they want to be 100% confident that the person and team they are investing in is who they say they are.
The panelists of angel investors agreed that it is critical for entrepreneurs to be upfront, open, and honest about anything and everything about yourself and your business. Angel Investors do substantial background research on your business, your market and financial assumptions, your customers, and your personal history. Omitting key details in your business pitch and meetings due to a concern that it may prevent you from getting funded, will likely lead to rocky relationship and possibly destroy the investment deal.
Investors conducting their due diligence will find the gaps, in your business, and will due extreme due diligence on you and the management team. It is critical to raise potential issues upfront and acknowledge them yourself with your potential investors. Entrepreneurial companies are not supposed to be perfect, but investors do want assurance that entrepreneurs are trustworthy and are able to acknowledge and bring forth potential issues and challenges before they are uncovered later.
On the legal side, almost all investors will want your organization to be registered as a C Corporation. C Corporations provide the most favorable investment environment for most investors. If you are not registered as a C Corporation when investors agree to invest in your venture, many investors will help you through the process, however be prepared to spend some time and money working with lawyers and the investors in getting your C Corporation established.
In summary, Angel Investors provide start ups the capital they need to scale their venture, but more importantly they will help and guide you strategically to help ensure that you meet the financial milestones that you and they believe your company can achieve. Not every business meets the criteria for Angel Investors, not because it is a poor business, but because the business does not have a strong exit strategy. However, many entrepreneurs fail to be funded due to their lack of being able to meet investor's expectations from a personal and professional level. Ensure that you have all of your ducks in a row during your fund raising process to ensure a smooth ride and focus on convincing investors that you have a viable exit strategy.