By Ed McLaughlin and Wyn Lydecker
Even though I am not a big believer in the two-minute funding pitch, I have come to learn that it does serve a purpose in culling and sorting potential angel investments. Once I have selected my investment targets, the real opportunity to build a bridge between entrepreneur and investor takes place.
I call this meeting the 7-Step Angel Funding Process. Besides assessing the entrepreneur’s willingness to make the sacrifice for success, I ask each entrepreneur to conform their presentations to the three-hour agenda outlined below. I believe this approach enables the investor and the entrepreneur to drop their guard and jointly assess the genuine potential for working together.
Here is the letter and the agenda I send to each entrepreneur in advance of our meeting:
The purpose of this 3-hour meeting is to learn about your product, assess your business model, determine product/business viability, and quantify cash/investment needs to become profitable.
I want to be very clear upfront that I have agreed to meet to give you my best advice on The Way Forward. I will be very reluctant to participate if I believe that it is a visionary business without a clear plan to become profitable quickly. You may need visionary venture capital investors not angels. That being said, I would like to plan our time as follows:
Step #1: Brief Introductions – 10 Minutes
Step #2: Evolution of Concept – 20 Minutes
- How did you come up with the Idea?
- Write-up a concise description of the Business Opportunity
- Who is the Ideal Customer?
- What is the Size of the Market?
- Generate a Business Evolution Timeline – Accomplishments & Challenges
- What are your “Top 3” obstacles?
- Who is your Competition?
Step #3: Product Viability – 15 Minutes
- Do you have any Customers?
- Who was your 1st Paying Customer?
- How many Paying Customers do you have?
- How many Customers pay Full Price?
Step #4: Product Demonstration/Discussion – 30 Minutes
- How does your product work?
- What is your Value Proposition?
- Is your Value Proposition Compelling?
- Does your Product redefine the way your Customer succeeds?
- Does your Customer believe that it helps them succeed?
Step #5: Business Model – 45 Minutes
- How do you make money?
- What are your sources of revenue?
- What are your primary expenses?
- How much have you already invested/spent – Please quantify it
- How long will it take to reach breakeven?
- Present current financials
Step #6: Realistic Discussion & Strategy for the Way Forward – 30 Minutes
- How much Money do you really need to achieve Breakeven?
- What are your Ideal Sources for Investment?
- Generate a List of Potential Investment Partners
- Can you Partner with Complementary Businesses to realize your Vision?
- Can you Partner with Competitors to realize your Business Vision?
- Generate a List of Complementary Businesses
- Generate a List of Competitors?
Step #7: Tough Questions – 30 Minutes
- Can you implement the Plan?
- Are you being Realistic?
- Do you have the Stomach for it?
- Are you willing to make the Sacrifice?
- Is it Worth the Risk?
- What are your Next Steps?
Please prepare this material in advance and confirm your agreement to meet.
Ed McLaughlin is currently co-writing the book, The Purpose Is Profit: The Truth about Starting and Building Your Own Business, with Wyn Lydecker and Paul McLaughlin.
They are currently offering a complimentary eCopy of The Startup Roadmap: 21 Steps to Profitability here.
Copyright © 2015 by Ed McLaughlin All rights reserved.
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