Chasing Angels: What Early Investors Look for In a Pre-Series A Company
"When you're talking to me in the first minute, I'm thinking - is this person a leader?" - Ron Conway, American angel investor, often described as one of Silicon Valley's "super angels"
For any startup, securing angel investment funding is a game changer. The money not only helps the company hire talent and experts in the subject matter, but also pay for essential operations, such as market research, product development, and its mass production, to name a few.
In an angel investor, a company also gains an essential mentor, which, using its vast startup ecosystem connections, can source anything the company needs, whether it’s market expertise, or just basic, operational advice.
For an early backer, the right fit and feel of a company is paramount. The right founders, their expertise, and a wholesome understanding of the problem they are trying to solve, are the most basic requirements for an investor to get interested in a company. Score 100 out of 100 on those fronts, and you’ve grabbed their attention already.
Following are some things early stage investors look for in a company:
What’s going on, and what will happen eventually?
“When we sit down with founders, we like to see how much thought and detail they can provide about the current status and future projections for their company,” says Anis Uzzaman, chief executive officer at Pegasus Tech Ventures, which has investments in several Southeast Asian companies, such as Bukapintu, a career development portal in Indonesia, ZUU, a Japanese financial media site, and Money Design, a Tokyo-based financial robo advisor, among others.
In particular, if the company is raising funds, Uzzaman says he would want to see a detailed plan on the usage of funds.
“This helps us gauge how resource efficient they are and how close they may be to product-market fit,” Uzzaman says.
It’s all about the team
“The best ideas are worthless if you aren’t able to execute. So we need to know who we are investing in. Why are you the right people? Show us you have the technical chops, the experience and that stick-to-it-iveness to see the project through to the end,” says David Blumberg, founder and managing director of Blumberg Capital, an early-stage firm that has an investment in Singapore-based credit scoring and identity verification startup Lenddo.
However, startups should also be upfront about their shortcomings, such as not having any sales expertise, despite stellar founding members.
“We can help train team members in various functions and provide operational expertise. We also can help you recruit strong players to fill open positions,” Blumberg says.
“It’s all about the team,” he added.
What’s the problem?
“Startups need to be able to demonstrate that they know what problems they are solving, and their unique value propositions. They also need to show that they know who their target customer is and why they will use their product/service,” says Uzzaman.
Furthermore, lack of focus and trying to solve too many problems at once can also make their value proposition in their services weaker overall, he says.
“The inability to provide more detail for the current and future operations signals lack of organization within the company. In addition to that, if they are unable to clearly define their competitive positioning and market, then it is tough for us to proceed as they may struggle to understand how to develop and maintain defensible moats and assets.”
Identifying the right investor
Uzzaman says startups looking for funding should first themselves research the kind of investors and VC firms that would be interested in funding them.
“Every investor will have different criteria and what they will want to hear from each pitch, so figuring out early what information will convince investors to write checks will be important,” he says.
Startups should also be able to point out what funding they can receive, and from whom, besides the VC they are already pitching to.
In a nutshell, founders should know who is more likely to invest in their product, based on the investor’s past investments, type of startups in their portfolio, and funding criterias.
Perfect your pitch deck
A good pitch deck should present the story of the company in their current position, and their plans moving forward. The company should also demonstrate that they know what problem they are solving, their target customer, an understanding of their specific near-term and long-term market opportunities, and how much of it they can realistically capture.
And all that should then be reflected in the company’s go-to-market strategies.
Other things a pitch deck should include is what traction a startup has achieved in terms of partnerships, or revenues year-to-date, and how it translates to projections and the startup’s growth potential.
“Finally, we want to see that whatever funds they are raising correlate from their market opportunities to projections, and are an efficient usage of funds for their current status,” says Uzzaman.
Some of the biggest Angel investors in Asia include Singapore-based BANSEA and Angels Den, Philippines based ManilaAngels, Indonesia-based ANGIN, NEXEA, to name a few.
Aparajita is Deputy Associate Editor for Entrepreneur Asia Pacific. She joined Entrepreneur after nearly five years with Reuters, where she chased the Asian and U.S. finance markets.
At Entrepreneur Asia Pacific, she writes about trends in the Asia Pacific startup ecosystem and tries to keep a hawk-eye on what's caught the imagination of VCs in the region. She also loves to look for problems startups face in their day-to-day and tries to present ways to deal with those issues via her stories, with inputs from other startups that may have once been in that boat.
Outside of work, she likes spending her time reading books (fiction/non-fiction/back of a shampoo bottle), chasing her two dogs around the house, exploring new wines, solo-travelling, laughing at memes, and losing online multiplayer battle royale games.
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