FEATURE > ANGEL INVESTING

Once you have identified your Angel, how should you prepare to have the best chance of interesting him or her?

Still an idea is ok

Angels, by definition, invest at the earliest stage. They do not expect running businesses, full business plans, or even set business models.

In fact, for an entrepreneur, working with an Angel to shape the business can be part of the investment process. Sridar Iyengar, an active Angel investor in both Silicon Valley and India shared his perspective, "If I have been part of that process, then actually I have some skin in the game. I want it to succeed. And it's easier to put the money in."

Just an idea is not ok: know your business

At the same time, Sridar's interest is also determined by "the amount of homework the entrepreneur has done. Because each of us has an idea every day of the week and tomorrow that idea is gone and a new one comes up."

NS Raghavan, with 19 Angel investments to his credit, feels that many of the entrepreneurs who approach him are not ready, "What I find is that a lot of people when they come they have an idea; an idea based on what they have experienced in this company or somewhere else. But the business viability - they don't spend enough time on that."

According to Angels, some basic questions that entrepreneurs need to have thought through include:

	What is the problem, the 'pain point' you are addressing?
	Who and where are the target customers and how do you reach them?
	At what price point would someone be willing to use this product or service?
	Why do you think your team will succeed - particularly if there is no prior entrepreneurial or industry experience?
	Who is the competition, and why do you have an advantage?

Take the idea to the next step

Even better would be to take the idea to the next stage, explained R. Ramaraj, founder and former CEO of Sify.com, and one of the founders of The Chennai Fund.

Ramaraj explained that they would like entrepreneurs to move to a stage "where you have a prototype in place that a customer could actually try and see what the service looks like or what the product looks like….. So if it is an IT product, have you spec-ed it out? Have you got some code? Is it actually working? Have you had one test customer?" It might only be a lab version, but bringing the idea into the real world is one way to engage Angel attention.

External validation

If you want to convince an Angel, it helps to have convinced other people along the way.

"I think entrepreneurship begins, or the process of entrepreneurship begins the moment you have your idea and you convince someone who says: 'hey, that idea looks good to me,'" explained Sridar.

Obtaining external validation - building believers - is a key to proving the idea has merit. "The first thing is to try to get somebody who has creditability in that area, to believe in the idea," Sridar clarified.

The ultimate validation, of course, comes from having a customer - someone actually willing to pay for your product or service. At such an early stage, however, that may not be possible. In which case, there is value in having a customer become a believer in your efforts.

Pitch and plan - a joint exercise

Some Angels are not interested in reading long documents. "I haven't got the patience to read 20-30 pages business plans, I want to know: what's the opportunity?" said Sridar.

But if you are going to tap into the more systematic approach of an Angel Network, you should be prepared to put together a formal business plan and presentation.

"The first thing I would tell you is put your proposition and business plan together. When we talk to the entrepreneurs and they send mails to us, we figure out that they may need help with this, and we do point them to people who can help them," explained Padmaja Ruparel, Vice President of Indian Angel Network, and an Angel investor.

But whether an entrepreneur is working with an individual or a network, at some point building a plan becomes a joint exercise. "Once they have done some thinking on the value proposition, their competition, we do work with them," says Padmaja. "Sometimes we practically pull out of them why would I invest in your idea."