L-SPARK’s Mentor blog series features expert advice for startups from our community of mentors and advisors. Our topic this week deals with approaching angel investors for funding. We asked Laurie Davis, an L-SPARK mentor, to share some of the insights he’s gained throughout the years as an angel investor in the tech industry.
Laurie founded both the Ottawa Angel Alliance and the Capital Angel Network and also invests in local companies. He has continuously mentored entrepreneurs in the Ottawa community.
L-SPARK: When should a startup begin to seek out an angel investment?
LD: I would say start thinking about it at the beginning. Start to nurture your network and make it a point to get to know people. It’s important to recognize that when you actually go out there and start raising money, it is going to take at minimum three months. So make sure you’re prepared for the time frames involved.
L-SPARK: How should a startup go about finding investors?
LD: I get asked this question often and I say there are three things: networking, networking and networking. Founders should aim to go to relevant industry events so they can get to know as many people as possible. Most investors are more likely to take a call from someone they’ve met before as opposed to a cold call. Cold calls don’t really work. Nobody invests money on the first pitch and nobody will invest in somebody they don’t feel they know.
L-SPARK: What are the most common mistakes you’ve seen in entrepreneur pitches?
LD: The biggest mistake people make is not being able to succinctly describe key details about their startup. My pet peeve is being half hour into a pitch and not really knowing what the business is yet.
People don’t spend enough time thinking about how they’re going to take their product to market. Many entrepreneurs focus their pitch on the technology, or the problem they’re solving, but they don’t provide enough information about how they’re successfully going to take it to market.
L-SPARK: Are angels industry-focused when it comes to the companies they invest in?
LD: I think most investors, whether they’re VCs or angels, tend to cluster around things they’ve invested in in the past. If you’re going to pitch a VC or angel in a space they’ve never invested in in the past, it’s probably going to be an uphill battle. So I would check on their website and check with other people they’ve invested with in order to see what sort of areas they’re comfortable with.
L-SPARK: Do you have any final words of wisdom for investment-seeking entrepreneurs pitching their businesses?
LD: Think through how you’re going to take your product to market and how you’re going to be successful. A good product does not make a good business - it needs a good marketing plan alongside it.