Seven different types of investors and how to win them over
Too many entrepreneurs fail at raising investment. We can’t stand to see these incredible ideas fall into obscurity due to poor communication. At the heart of creating an inspiring and convincing pitch is an understanding of the audience you’re communicating to. Most entrepreneurs need to better understand their audience. Not the audience they’re selling their product to, but the audience they’re selling their shares to. Until you understand the different types of investors, you’ve little chance of convincing them.
From my experience, you can group most angel investors into seven different categories. As you begin pitching and reach out to more and more high-net-worth individuals you’re bound to meet some, if not all of these characters.
1. The Non-Tech Investor
They may not fully understand the technology behind a brilliant tech idea, but they will have plenty to say about the business model. They will form their own opinions on the strength of your business based on their vast business experience. Remember that while they may not be au-fait with the latest tech developments, they’ve most likely made a lot of money in business and know the ropes.
2. The Detail Investor
Following a successful pitch, they will scrutinise every aspect of your business plan and financial projections – so you’d better be confident that they demonstrate a credible and investable business model. They’ll probably want to meet you multiple times and they’ll execute heavily on due-diligence. Anything you can do to make their lives easier such as providing well presented, detailed and easy to digest documents, summaries and reports will go down well and demonstrate that you understand what they’re looking for and can be trusted.
3. The Sheep Investor
These investors are worth building a good relationship with. The only problem is that before they consider investing in your business, they want other Angel Investors to commit first. They’ll never lead a round but are more than happy to follow a lead investor they trust. Once you have one of the other types of Angel Investor on board, circle back to these investors to see if they’re ready to follow.
4. The Insightful Investor
Many Angel Investors don’t just want to give capital. They also want to share their experience and expertise with a founding team that inspires them. They want to be a part of your success on a deeper level than just providing capital, often as a Non-Executive Director, offering insightful advice and connecting you with people in their network who could accelerate your business.
5. The Greedy Investor
Not all investors agree with the first valuation that’s brought to the table, and they may ask for more equity than you first proposed. There’s nothing wrong with negotiating but take your time before signing any deals at a lower valuation. If you’re consistently challenged over your valuation, be mindful that it could be an indicator that you’re attempting to raise too much for your current stage in the fundraising journey.
6. The Skint Investor
Maybe they lost out on a few investments that didn’t quite pay off. Or perhaps they’ve invested further cash into a rising star in their portfolio. Either way, not all investors will have cash available right now to invest. They will, however, be accepting pitches as they want to keep their finger on the pulse. Remember that most investors have a network of other investors, so word of your opportunity will spread (if you build a good report you can even ask for introductions). Just be aware that they have no intention of investing money in you right now – but they may come good for later rounds, so keep them sweet.
7. The Doubtful Investor
These investors might show interest in your business model, but doubt you as a founder, which can understandably feel pretty personal. By demonstrating that you’re an investable entrepreneur you should be able to alleviate those doubts completely. By having a believable business plan, credible financials and a perfect pitch you’ll be able to convince even the most doubtful of investors.
Investors meet their fair share of startups and only invest in a few, so don’t feel too despondent if you get turned down. The most important thing to take away from pitching to the many different types of investors is experience. Learn from the pitch, get more confident in your delivery, and prepare a response for the common questions you get asked. The more you put yourself out there, the better the chance you give yourself to succeed and find investors that align with your business and give you that elusive yes.