New Book Demystifies The Rites And Rituals Of Raising Angel Money Brian Cohen, Chairman Of The New York Angels, Shows Start-Up Entrepreneurs How To Raise “Smart” Money And Architect Their Businesses For Growth InOffers Personal Insight Into The Minds of Angel Investors
“I encourage you to remember that angel investing is a high-touch, personality-driven activity. Success with angel investors requires more than just a great idea. It requires creating an emotional hugging relationship. Angel investing is truly a high-contact sport,” explains Brian Cohen in his new book WHAT EVERY ANGEL INVESTOR WANTS YOU TO KNOW
Angel investors are people who, using their own money, provide ninety percent of all earlystage startup capital to new businesses and receive a percentage of ownership equity in return. As chairman of the New York Angels and the first investor in Pinterest, Brian Cohen is one of the most engaged angel investors out there today. In WHAT EVERY ANGEL INVESTOR WANTS YOU TO KNOW, Cohen and co-author John Kador take readers on a step-by-step journey through the world of angel investing showing entrepreneurs how to attract funding and work with the smart angels who then invest in their companies.
Written in a personal and friendly style, WHAT EVERY ANGEL INVESTOR WANTS YOU TO KNOW is packed with actionable advice supplemented by Cohen’s own anecdotes, and comments from other angels and successful entrepreneurs. Readers will learn how to position their businesses for thoughtful funding; develop effective pitch presentations; meet, negotiate and team up with angel investors; and more. The book is a treasure trove of information for start-up entrepreneurs and angel investors alike. The following key insights are straight from the book:
Investor raising vs. money raising – “It’s the smart money that really helps you. It’s your choice about the investors who will provide the money, as well as everything else a smart investor offers a startup over the course of its development,” Cohen maintains. The right investor can provide counsel, contacts, and other benefits that will dwarf the initial monetary investment. Therefore entrepreneurs need to carefully consider which angel investors they bring on board.
Planning the “exit” – The only way an angel investor makes money is when the company is sold or “exits.” Therefore angel investors are looking for start-ups with a defined exit strategy – right from the beginning. “A well-crafted exit strategy, aligned to the characteristics of the startup and market conditions, will improve the probability of success, shorten the time to exit, and often increase the ultimate valuation at exit,” Cohen explains.
Savvy start-ups “go belly-to-belly” with their customers – Entrepreneurs who most impress angel investors are the ones who deeply know their customers. They have done research into the demographics of their typical customers: age, gender, geography, lifestyle, income, aspiration, brand preferences, shopping habits. They know what their behavior and thinking is because theyʼve spent time with them. They even learn which words and phrases resonate most with customers. “This research doesn’t come cheap or easy, but it’s available with a little work,” states Cohen.
Making a great pitch – Entrepreneurs usually have about fifteen minutes to pitch their businesses to an audience of angel investors. Cohen advises, “Start by telling us what you propose to do, why you propose to do it, and how you propose to do it . . . Include touchstones or points of reference that we can relate to. Perhaps the most powerful touchstone is a reference to a respected customer who has validated the product. Include actual – not anticipated – metrics like sales figures or cash flow.” Never present inconsistent or loose numbers; never shoot from the hip in answering angels questions; and never make a sloppy presentation containing typos, misspellings, or mistakes. “
Anticipate turning “due” diligence” into “do” diligence – “Due diligence becomes a trap if itʼs used to identify reasons not to invest in a startup. I believe the process should equally be applied to identify reasons to invest with enthusiasm. I call this process “do diligence,” explains Cohen. Entrepreneurs should expect potential investors to conduct an objective check of their business model, talk to customers, and verify that the product or service, team background, and revenue projections are true as represented, and offer the information before being asked.
Getting to “no” is just as important as getting to “yes” – Smart startups know that only a small percentage of the angels they approach will eventually invest in them. “The trick is to limit your resources to the angels who are most likely to invest and cut your losses with the rest, no matter how many questions you answer or how many documents you provide,” advises Brian Cohen. Entrepreneurs deserve a quick decision and they should ask for it.
In addition to fifteen chapters filled with proven advice, WHAT EVERY ANGEL INVESTOR WANTS YOU TO KNOW includes appendices offering a due diligence checklist; the New York Angels proprietary term sheet; tools for founders to do due diligence on angels; and ideas for calculating equity distribution and establishing valuation.
After reading WHAT EVERY ANGEL INVESTOR WANTS YOU TO KNOW, founders and entrepreneurs will have a clear handle on what they need to do to raise smart money. Angel investors, too, will learn a variety of insider “best practices” from a highly respected practitioner. As David S. Rose, founder of the New York Angels and CEO of Gust, says, “Cohen and Kador have distilled their first-hand experiences into an intensely personal, highly readable journey into the mind of angels that should be kept at the bedside of every start-up CEO.”