Counselor, Idaho Small Business Development Center; principal in Loon Creek Capital; member of the Boise Angel Fund.

 

 

I recently attended a

seminar on Trends in

Raising Capital in Palo

Alto sponsored by the Angel

Capital Association. The

ACA is an association of

about 300 angel groups

throughout the United

States and Canada Those

300 groups collectively represent

about 10,000 active

angel investors.

The seminar provided information

to leaders of angel

groups on the current

state of the angel capital

market. One section I found

particularly interesting was

titled "Meeting Investor Expectations."

The information, which I

summarize below, was

based upon a membership

survey by the ACA Fiftyeight

groups participated,

KEVIN LEARNED

Counselor, Idaho Small

Business Development

Center; principal in Loon

Creek Capital; member of

the Boise Angel Fund.

representing more than

3,400 individual angels.

Those angels participated in

more than 200 deals in 20l0,

and invested more than $45

million.

Generally only one out of

10 or 20 applications receives

funding. According to

this survey, there are things

the entrepreneur can do to

improve the chances of favorable

action. While the

survey was of member

groups of the Angel Capital

Association, I believe the

fmdings can inform entrepreneurs

approaching individual

angels as well.

> Get a referral. The typical

group receives 15to 30

applications a month, which

is more than they can

thoughtfully respond to. A

referral to a group by a trusted

party (e.g., another angel

group, a respected individual

angel or venture capitalist,

an entrepreneur in

which the group has invested)

may help move the application

to the top of the

pile.

Referrals from economic

development organizations

and websites are viewed as

having little value. The perception

is that the interests

of these organizations are

not aligned with those of the

angels and therefore their

referrals cannot be trusted

> Executive summaries

matter. The executive summary

is like a resume. The

purpose is to get a interview.

Likewise, the purpose of the

executive summary is to get

a meeting with the angels. In

the case of the Boise Angel

Fund, over four years we received

214applications. Only

66 were invited to a meeting.

So two thirds of the executive

summaries did not

capture sufficient interest to

result in a meeting.

Good executive summaries

are hard to write. In

my experience, entrepreneurs

often spend weeks on

their business plans and

minutes on their executive

summaries, when in fact

they should devote a great

deal of effort to the executive

summary. In the ACA

survey, only 38 percent of

the executive summaries

were rated as good.

>What your summary

should say. Compelling executive

summaries are not

more than two pages. They

are well written and without

grammatical and typographical

errors. They are delivered

in PDF format so there

are no accidental changes or

formatting problems.

They cover the following

items, captured by the

acronyms ''POST'' and

"STORM."

P: the problem.

0: the opportunity or

market size.

S:your solution (your

product or service).

T:your technology.

S:your go-to-market

strategy.

T:yourteam.

0: others in the market

(the competition).

R: resources needed by

your business.

M: milestones you intend

to reach with the resources.

Obtaining a referral to a

group or an individual angel

and preparing a thoughtful

executive summary will improve

the odds that you will

be invited to a meeting with

angels, which is the first

step in the funding process.

kevinlearned@boisestate.edu,

426-3875,