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What Angel Investors Expect To See in Your Business Plan

What Angel Investors Expect To See in Your Business Plan

So you’ve got the idea for the Next Big Thing, and you’re ready to get started. You’ve mapped out the path ahead, done all the right market research and are already trying to decide between a new car or a new boat to reward yourself. There’s just one little thing holding you back — the investment funds to make it all happen.

It’s time to start thinking about angel investors.

An angel investor is a high-net-worth individual who provides financial backing for businesses, usually in the startup stage, typically in exchange for a significant equity stake in the company. Listening to pitches like yours is what they do, and as a result, they can be both hard to impress and sceptical about claims to have the idea for the Next Big Thing.

An experienced angel investor knows that ideas are often little more than that. What gives them potential is a business plan that shows that this idea has been tested and considered from every angle and still shows promise even after being poked and prodded.

Creating a decent business plan is easy enough, and there is no shortage of templates online that make it even more straightforward. But if it’s so easy to make a plan that explains your idea, why is it that less than 1% of startups get backing from an angel investor?

The answer is that those free business plan templates might be well organised and make a good impression, but they are missing the depth and insight that comes with practical, real-world experience with early-stage businesses.

And we know what it takes to produce a quality business plan — we’ve written more than 25,000 of them for every business sector imaginable and helped our clients raise millions in funding in the process.

If your business plans depend on getting the support of an angel investor, the following tips will bring you much closer to making it happen.

The Essential Business Plan Elements That Angel Investors Expect

Angel investors are experts at detecting the signs that show that a young business not only has great potential but knows how to manage itself and move the business forward. Here are some specific aspects of a startup that angel investors pay careful attention to.

Solid ROI

Let’s start with the basics. Every investor wants to see that any money they put into the business will return, preferably multiple times. When putting your business plan together, make it clear that your main objective is to deliver an attractive return on their investment.

Among other things, this means detailed information about expected cash flow and basic financial metrics. Don’t make the common mistake of overlooking the financial statement of your business plan or relying too heavily on optimistic but vague estimates. Keep everything realistic and show how you plan to reach these goals.

Engagement & Energy

Clearly, the goal for investors is profit, yet that’s not their sole motivation for investing, understanding that not all investments will yield success. Many angel investors are open to supporting ventures that show promise, even if these endeavours may not result in a profitable outcome.

A study by Wharton Entrepreneurship revealed that in 2017, only 40% of angel investor exits generated a positive return on investment. This study indicates that a significant number of angel investors prioritise the enthusiasm and vision behind a project over its immediate financial prospects. When a project aligns with an investor’s personal beliefs or interests, they are more inclined to provide backing, embracing the associated risks.

Understanding The Market

Demonstrating a clear understanding of your market is crucial for acquiring investment for your startup business. This means approaching it from multiple angles and using relevant statistical insights to show the room for growth. Actual numbers from the market are essential to painting a picture of where your business can go, given the right support.

Key aspects to cover here include the market’s overall size, its specific segments, the unique position your product or service occupies within this market or industry, available growth opportunities, emerging trends and technologies, and any entry obstacles. Ensure your business plan communicates a comprehensive grasp of both the opportunities and the challenges, along with strategies to navigate them.

The People Who Will Drive The Business Forward

The success of a small business or startup is heavily influenced by its management. The critical link between effective leadership and business success underscores why investors prioritise ensuring the right team manages their investments. Given their financial commitment, investors want to know that their investment is in good hands.

Therefore, investors look for a management team with a comprehensive skill set encompassing areas such as research, sales, accounting, manufacturing, and human resources. This diversity ensures that all key facets of the business receive proper attention and management.

Market Fit & Traction

Securing investor interest can be significantly enhanced by showing early signs that your business is finding a receptive audience. This can be shown in several ways, from actual sales to internet traffic to leads and more.

Although angel investors may invest in the early stages, most investors prefer engaging with businesses that have demonstrated some level of traction, as this reduces their investment risk. It’s important to elaborate on all sources of revenue and any agreements that have been finalised, offering investors a clearer view of your business’s broader potential.

An Active Hand In The Business

Some investors adopt a passive approach, allowing the company to conduct its operations without their intrusion. Other investors take a more proactive role in the company’s management. This active involvement can be advantageous, particularly when the investor is enthusiastic about the project and brings relevant experience from similar business ventures. Their guidance can be vital for the company’s growth and success.

It might be beneficial for entrepreneurs to specify the level of investor involvement they anticipate in their business plan. Making such expectations explicit ensures that both parties have a mutual understanding of the investor’s role and responsibilities.

Searching For The ‘Exit’

Before committing to an investment, angel investors typically want assurance that a clear exit strategy will be available to them in the future. If you’re seeking funding from angel investors for your business, it’s important to provide them with a timeline indicating when they can expect to see returns on their investment. Failing to outline a specific timeframe or conditions for exiting the investment is often viewed as a warning sign and could deter many angel investors.

Putting Together An Effective Business Plan

Including the elements above in your business plan will have you on the right track to securing funding. But you must ensure that your plan is constructed properly and organised in a sensible, logical order. While there is no one ‘correct’ format for all circumstances, this is the standard order we typically follow at Joorney:

  • Objective
  • Products or Services Offered
  • Market Analysis
  • Sales and Marketing Plan
  • Operations Plan
  • Structure of the Business
  • Management Team Background
  • Financial Overview
  • SWOT Analysis
  • Capital Requirements

Creating A Business Plan That Will Attract Attention From Angel Investors

Following the correct guidelines will help more startups connect with the backing they’re searching for. Contact Joorney today and learn more about how we can help you craft a business plan that will attract the attention of investors, along with any other business documentation you may need to move your business forward.

We here at Joorney are very familiar with the requirements of business plans and the structures and formulations that get results in the form of backing from angel investors.  Given the competitive backdrop of funding in the startup sector, it’s crucial that startup owners be aware of the standards and expectations involved.

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Disclaimer: Joorney Business Plans is not a law firm nor an immigration consulting firm, and all information provided in this document should not be considered as legal advice or any advice or recommendation on any immigration application program. All information provided in this document should be verified by a licensed or certified immigration professional before the reader can act on this information. As such, it is understood that Joorney Business Plans Inc. shall not be liable for any loss or damage of whatever nature (direct, indirect, consequential, or other), whether arising in contract, tort, or otherwise, which may arise as a result of your use of (or inability to use) this document, or from your use of (or failure to use) the information on this document.

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