BINUS Business School

4 Tips to Attract More Angel Investors for Your Startup

Before a startup can expand its wings and move to the early or growth stage, the startup must approach the angel investors. Generally, the angel investors are high net worth individuals among your circles. Mostly they consist of your family members and friends. The funding from these angel investors is crucial to ensure that your startup will not end up in the valley of death.

Approaching investors is not an easy task. If you cannot convince the closest people around you to invest in your startup, then you will not be able to convince venture capitals to fund your startup in the growth stage. Eddi Danusaputro, CEO of Mandiri Capital Indonesia, provided tips for startups to attract investors during his CEO Speaks on Leadership session “What Do Venture Capitals Seek in Startups in the Post-Pandemic World?” on Friday (12/6) held by BINUS BUSINESS SCHOOL. Here are the four tips to attract more angel investors for your startups.

One Big Problem, One Scalable Solution

Every startup should begin with the “problem and solution” stage. Look around and start thinking, what is the big problem that almost everybody has? If you find one, or perhaps several, you already have the first base of a good startup. The next step is to find the right solution, and this one can be tricky.

First, the solution must fit perfectly with the problem. After all, the solution will become your startup-selling product or service. Second, it must be one solution that has not been found yet. Your startup can adapt an existing solution that has been proven to be a success, though you need to add something new to it. Third, your solution must be scalable. That way, you can ensure that your product or service can be improved along the way, making it stand the test of time.

Build Chemistry with Your Team

As you have prepared the very base of your startup to entice investors, the team’s chemistry is also considered as a focal point. If you have assembled the founder’s team, it is time to appoint them to specific roles. There are three main roles that every startup should have: the hacker, the hipster, and the hustler. Suitable to their name, the hacker controls the tech aspect of the business, the hipster manages the visual and marketing aspects, and the hustler handles the sales and business development.

It is important to be in sync with your co-founders. If you and your co-founders are not on good terms, this will create tension within the startup and can potentially ruin the workflow of the company. The founders are the image of the startup, one that reflects the condition of your startup. Make sure that the founding team shares the same ideas, vision, and mission. As you present your startup to the angel investors, they will be convinced that your team is confident and committed to that startup.

Know Your Value

Most people think that the value of their startup is the amount of capital it has. However, this is simply untrue. The best way to calculate your startup valuation is by using a multiple analysis. Take five comparable companies and look for their performance indicators (revenue, EBITDA, and GMV). Then, calculate the ratio of their performance indicators and market value.

From this ratio, you can determine your startup valuation using only your performance indicators. Why is valuation so important in attracting angel investors? They need to be convinced that your startup is a great investment, and valuation is an indicator for them to see how your startup may grow in the years to come. Once you know your startup value, you can negotiate better with the company’s shares.

Be Open-Minded

Some investors will give your startup some inputs or criticisms, even when you did not ask for it. However, be assured that they have well intentions. These investors will own the shares of your company, granting them the right to partially manage the company. Be open-minded and take their opinions into consideration. This will give them the impression that your team is willing to cooperate with them.

Nevertheless, do not let your emotions interfere with your investor relations. Be professional and mindful of what you are about to say to these angel investors. Should you receive some criticism, do not take it personally. Although it is also important for you as a founder to be resolute, you must reason with the investors if you believe their inputs are not well suited to your company. ** (E-PID)