Entrepreneur Readme: How do I find 7 angel investors?

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Lead: Janiv Nizan (Yaniv Nizan) is the co-founder and CEO of Soomla, an Israeli start-up company, which offers an application-within-payment solution to mobile gaming. He recently wrote about Soomla's hard journey through angel investor financing, hoping to inspire other entrepreneurs.

The following are the main contents of the article:

When I started Soomla, I thought financing was easy. 2008, I participated in the creation of the first company Eyeview, has been from two VC there to obtain an investment, when I was the first start-up, no experience. I thought it would be much easier to start a business this time.

After all, I am now more experienced, a strong team, our business model has been validated, and with the Israeli ABBA Evan Avenue Most VC relationship is good. For unfamiliar people, Abba Evan Avenue is the equivalent of Silicon Valley's Dune road (Sand Hill M.I.), gathered by many well-known VC.

But it turns out I was wrong.

Financing has never been easy. As you may have heard, some entrepreneurs rush out of a VC's door with a personal cheque from an executive director, but before that, they often experience 6 months of suffering. In addition, the big environment also changed, 2012 in Israel if want to get VC investment, more difficult than before. I quickly realized that if I wanted to finance Soomla, I had to change my strategy.

Looking for angel investors

Right now, I face the first challenge is that VC are all very high-profile, but angel investors are mostly "stays." The reason is simple: in addition to acting as angel investors, they usually have a full-time job, such as the CEO of a company, or an entrepreneur who has sold a company that has been founded. One of my investors doesn't even have LinkedIn personal pages. In fact, any big company executive can be an angel investor.

I was on some very special occasions to find potential investors, for example, during a job interview, swimming in a swimming pool, or even sending my daughter to kindergarten. Once I was familiar with the VC introduced me to an angel investor, at this time I found that I have seen him before, just do not know he is an angel investors.

Contact with angel investors

I think that once you find the angel investors, the investment has become a matter of success, and I was wrong. I came to the meeting place to tell the angel investor that he would be able to invest in my company (he had recently sold his company to ebay), but he refused, leaving no room at all. He must be rich, and for tax reasons, he invested in my company, the return will be even greater, which part of the problem?

The way we convince private investors is different from VC. Most angel investors have made quite a lot of achievements, but they are still passionate about entrepreneurship and willing to help others. But they do not want to be regarded as agents of their own property. In contact with angel investors, it is important to respect the achievements they have made. To make angel investors feel that in your entrepreneurial path to success, they play an important role, let them share with you.

For example, I asked a successful entrepreneur to be a consultant and advise Soomla. After he gave me some good ideas, I found out that the entrepreneur was also an early investor and eventually became the Soomla's first investor.

Demo program to angel investors

As you can imagine, the way to show an entrepreneurial solution to an angel investor is also different from giving the VC a demo. In one demonstration, I told an angel investor that we first needed 250,000 dollars to complete the "Concept Validation" (POC), and planned to raise 10 million dollars through 3 rounds of VC funding.

This is not a good idea: first, startups are only 1% to 3% more likely to get 10 million dollars in financing from VC. Secondly, from the angel Investor's point of view, if we successfully completed 3 rounds of VC financing, then angel investors in our company's stake will undoubtedly be diluted, they have no reason not to oppose.

When presenting to angel investors, not only do you need different styles of slides, but the entire business plan needs to be refined. So, we have drafted a more refined business plan, with a full emphasis on the fact that our user base has a willingness to spend, and that we can make ends meet within 10 months without the need for additional investment.

In the slide show, we didn't talk much about market expectations or enter barriers analysis. Instead, we focus on how to get revenue and achieve profitability. The cases we use are also those that have little financing and fast sales.

Thanks to the information we had before, we can finally get the angel investors interested in the business plan, and it's time to end the demo. At this point, if VC, they usually take the initiative to come up with an investment agreement (Term Sheet), which lists detailed investment terms. But if it is an angel investor, the entrepreneur must be more active.

Keep looking for new investors before the money is accounted for

Financing at this stage, I began to negotiate with the specific terms of the agreement with the angel investors who are most likely to receive this round of financing. Although the investor wanted to get a vote, he didn't know much about the industry, so he was slow to make a final decision on the investment. With no bidders, I tried to work with 5 angel investors to complete a round of financing.

Each of them made a different request. In addition, even at this point, I still have the risk of financing short, so I need to keep in touch with the new angel investors in case of accidents. Ultimately, this proved to be a successful strategy.

A new angel investor was very interested in our business plan and offered to take this round of financing. Once the recipient is identified, negotiations with other angel investors will be much easier and our round of financing will be successfully completed. Although the first investor has parted ways with us, this is only a minor setback in the road to success and must be paid. Looking back at the whole process of financing, I believe that without the first investor, we might not be able to find a sponsor.

In the investment ecosystem, the importance of angel investors will only increase gradually, because of this, I hope that our financing experience will bring valuable experience to other entrepreneurs. (Xuan Chen)