Securing the financial backing of an angel investor is an exciting achievement for any entrepreneur and proving the value of one’s business idea or initiative to any kind of investor can be an intense and gruelling process. However, that’s not where the effort should end!
Through Bentleys’ role as a foundation sponsor of the Australian Association of Angel Investors (AAAI), we’ve gained a deep understanding of what angels both contribute to start up businesses and what they expect of their entrepreneurs.
Essentially, a funding agreement marks only the first step in the angel/entrepreneur relationship and to gain the most from it, businesses must continue to put in the maximum amount of time and effort to engage with their investor.
Here are ten tips for a successful relationship with your angel.
Be open to advice
One of the major benefits of having an angel investor on board is the access you are afforded to his or her business coaching and mentoring. Angels seek a ‘coachable entrepreneur’. Smart entrepreneurs recognise this as one of the most valuable components of the relationship with their angel and are open to accepting guidance wherever it is offered. Even though you may have your own ideas on how you see your initiative progressing, take note of your angel’s experience and be willing to trust his or her advice.
Meet face to face
Technology can make it easy to stay in touch no matter where we are in the world, but in any solid relationship, face to face time can do wonders. Agree from the onset how often your angel investor would like to meet in the flesh and make sure that you do whatever possible to stick to that arrangement. When you do get face time, remember that Angel investors often have multiple interests and commitments. When it comes to staying on top of developments within your company or industry, it is up to you, the entrepreneur, to communicate these to your angel. Make sure your angel is aware of news like major milestones, achievements, marketing opportunities and relevant legislation changes.
Networking can be an invaluable aspect of expanding your professional circle and growing your business. Angels often have access to many important contacts and having this network opened to you is a great privilege. If your angel extends an invite for you to network with his or her contacts, see this as an immense opportunity and gratefully accept! Likewise, if you come across an invitation or opportunity which could benefit your angel in terms of widening his or her professional or social circle, be sure to make the offer.
Sit down with your angel at the start of your relationship to understand his or her level of expectations in terms of reporting. Ensure your reporting is completed according to your angel’s preferences in terms of timing, formatting and processes.
Stay on top of industry developments
Always demonstrate to your angel that you are thinking more broadly than your venture alone by keeping on top of changes in the industry. Read trade publications, monitor current or potential competitors and subscribe to the latest research. Where relevant, inform your angel of significant developments. If something looks set to impact your business, either positively or negatively, inform your angel as soon as you can and if necessary, schedule time in for deeper discussion.
Always set realistic goals when it comes to your business model and where possible, develop these with your angel. Investors are attracted to businesses that are scaleable and if you don’t meet agreed milestones as the entrepreneur, you may find that investors will look at abandoning the funding. so you need to be realistic about what you can achieve by when.
Once you’ve secured funding, the key goal for many entrepreneurs and angel investors is getting your product to market as early as possible. To achieve this, continue to develop a solid understanding of your market size, your channels to market and the need vs want of your product/innovation. The most successful entrepreneurs keep a close eye on the market and back up their understanding with regular research and development.
Build Your External Team
Alongside your angel, trusted advisors are a key ingredient for success. Surround yourself with a good team early on and involve your angel in the appointee process of trusted business advisors. Accountants will provide solid structuring and asset protection advice and help you mitigate your tax positions now and upon exit. Legal advisors will provide advice on IP protection and franchisee models.
Up your skills
Demonstrate to your angel that you are always increasing technical, business and entrepreneurial skills through attendance at events, courses and conventions. If you wish to increase your knowledge in any particular field, consult with your angel first as he or she may have thoughts on how to best do so.
Ultimately, most angels are part of your venture to help you along the path to exiting and to maximise returns. If any point, your exit strategy looks set to change, consult with your angel immediately. Remember that your angel has a priority on their own investment strategy and timelines – keep the communication open if you get to an exit level ahead of planned growth. They may want to exit then, rather than stay onboard for future growth.
Bentleys is an association of independent accounting firms in Australia with specialist experience in the startup business sector. We work with entrepreneurs at all stages of business growth, providing business advisory, financial planning and taxation services. Bentleys is a proud supporter of the Australian Association of Angel Investors. www.bentleys.com.au
About the Australian Association of Angel Investors
AAAI is the national, not-for-profit peak body for Australian professional Angel Investors.
AAAI promotes a vibrant Angel community and culture in Australia and represents a community of peers supporting early-stage investment in Australia. www.aaai.net.au