You’re a bright-eyed entrepreneur with a viable product that customers are using and you’re considering taking the company to the next level. To grow, however, you need cash investments. So, how do you court investors?
“The relationship between investors and entrepreneurs is a similar relationship to a bachelorette and a bachelor,” Todd Lowery, director of investment readiness for NexusLA, told a group of fledgling entrepreneurs at BRAC’s Small Business Series Wednesday afternoon. “Typically investors are looking for high-growth companies to put their money into.”
One option to raise capital is to approach an angel network, where you can get multiple investors to buy into your company at once. Angels are typically agnostic regarding the investment type, Lowery says, but can sometimes be picky about the industry. IT, health and software companies are common investments for angels because they’re scalable.
So what does an angel look like? Angels are mature, highly educated and often have held executive positions in a company. They find their deals by either joining a network, talking to friends, talking to entrepreneurs directly or online, although Lowery warns only 3% of deals angels close on come from online sources.
While Baton Rouge has struggled to develop its own network of angel investors, there are other metropolitan areas in the state where entrepreneurs can turn for investment. Shreveport, Lafayette, New Orleans and Lake Charles each have established investor networks.
Investors want to see that the company team has a clear understanding of their market and data to back up revenue growth predictions. They also want an exit strategy, Lowery says, as investors typically look to cash out within three to five years of making their investment.
“Investors often bet on the jockey, or the management team,” Lowery says,”not necessarily the business idea.”