What does an angel investor want to see?
Posted by admin in Finance Saturday, 5 November 2011 12:57 4 Comments
I run a small retail business < $2million annual sales. I was approached by a board member of a not-for-profit group of angel investors with interest in helping us grow (relatives on the board not some random group). My question is this: What will they want to see before investing?
I realize the obvious: P&L, balance sheet, year to year growth, areas where market share can be increased. I have dealt with banks before and they always want the standard info. What else do I need to prepare?
Thank you.
Not for profit with relatives on the board investing your for-profit business sounds dangerous. Your relatives may be risking trouble with the IRS and other government agencies which may affect their tax status and might even lead to civil or criminal prosecution. Assuming that is not an issue however…… angels are not banks. Besides the usual boilerplate, angels are betting most on the skills and experience of management. A shrewd investor is concerned with the competency of the founder and his ability to deliver on promissed results in a short time frame. The day after the funds come in, you can expect to get regular calls asking for feedback on performance to plan. Your best resource is to have a proven track record “in this industry” with a similar venture, demonstrating that in that case the investors did well. Past success is the best sales point.
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They are likely to want to see everything you can generate for them, but they’re specifically likely to want to see 2 years of P&L’s, Balance Sheets and Sources and Uses. They’re likely to want to review payables histories for 2 years, and inventory turnover and GMROI metrics,. They’ll want a comprehensive business plan, including pro forma financials and a detailed cash flow projection for at least 12 months, probably 24. If you need assistance with any of this, I’m a retail consultant who works with small retailers like yourself.
Ted Hurlbut
http://www.hurlbutassociates.com
The answer varies if your business is a start up or a “simple” small business.
For the first case you will need to prepare slides that will elaborate on your idea, its relative advantage, tech/business edge etc. (follow the link for a detailed list).
In the second case you need the more basic stuff (P&L, CF etc.) and additional material about your business value (and edge) and most important – a future CF projection.
I hope it helps,
Hagay Levy