Angel Investments and Trust
If you are looking for any type of sizable investment from an Angel, it has to be from somebody who trusts you. This is because, while Angels are perfectly willing to invest in a risky idea or business, they don’t want to invest in somebody who might just piss their money away (if you’ll excuse my French!). They need to have the confidence that, at a minimum, you will use their money sensibly. After all, a good angel is investing in you, rather than in the idea. This is because ideas are cheap and value is in the implementation.
In my experience, trust can be achieved in four ways:
1. You know the potential investor.
2 You have a proven track record.
3. You have something tangible to demonstrate, that proves you can actually implement your ideas.
Many of the people I meet just want me to introduce them to angels who have invested in me, hoping that they will be able to convert a simple introduction into an investment. The problem with this line of thinking is that I can’t vouch for them. The conversation would go something like this:
Me: I met this guy, John, and he has a great idea. I think you should meet with him.
Angel: What is he like to work with?
Me: I don’t know. I just met him down the pub, but he seems like a good guy.
Angel: What’s his track record like?
Me: Well, he’s a young guy, not long enough in the tooth for much of a track record!
Angel: Can I see his product?
Me: He needs funding before he can build a product.
Angel: (Stares at me blankly).
— End of conversation —
When I started seeking funding for RevaHealth.com, I went to the person who knew my abilities best- my boss. I had been working for him for the previous 7 years and he knew exactly what I could and couldn’t do. I also knew that if I could get him on board, I could get him to introduce me to some angels that he knew.
The problem facing most young entrepreneurs is that they are too young to have much of a track record. Also, they are too young for their network to include the kind of person likely to be in the position of an angel investor. This fundamentally means that they have to have something tangible to show so as to get an implementation up and running. A couple of years ago this used to mean a prototype. With the worsening economic climate, however, it isn’t enough to simply show that you can get a technical implementation up and running. You also have to be able to demonstrate sales and/or marketing knowledge. What this normally means is showing that you are able to attract some paying customers and deliver value to them. This is a tough task, but bear in mind that when you are out looking for investment, you are asking someone to trust you with their money. It is not unreasonable for them to ask for evidence that you will use their money wisely.
So, if you’ve got a great idea but you don’t have the track record or network to secure angel funding, then build your product and get some customers. If you can’t do the development, find a developer who can. Remember that you are not trying to build a finished, polished application. Do the absolute minimum you need to sign up a few customers. Once you’ve got a few paying customers, everything becomes much easier. Get every bit of help you can from the various programs that are out there to help young entrepreneurs.
And the best of luck!
UPDATE: WhatClinic.com have recently expanded to cover cosmetic surgery in the UKand dentists in the UK.