June 19, 2014

Startups, Its time to Know What Exactly an Angel Investor Needs

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9Being prepared for the due diligence process, raising enough for at least 18 months, problems with high founder salaries, having an exit strategy ready and high advisor fees by Michael Blakey, Investor, Avonmore Developments
0:00 that 0:04 do please welcome to talk about to 0:08 common deal breakers michael blakey 0:11 beers thank you very much for having me here today 0:20 I'm just to give a better background about myself 0:24 I'm as it was said I i worth braving with fans for the match a four-time 0:28 angel investor 0:29 is the way that I describe myself and I invest in pre revenue base business is 0:34 no matter how it even if it's just an idea how early they are 0:37 and I get very actively involved in the business is 0:41 now the first thing I've got to say when I talk about change investing if you 0:44 talk to any change in best if you have four angel investors setting up 0:47 on that panel and you awesome the same question they will give you a slightly 0:52 different answer 0:53 there is no right or wrong way of doing this so what I'm gonna try and do 0:57 is give you the essence of what the deal breakers of probably 1:01 ninety-five percent have angel investors maybe with a better but we care and 1:05 that's that's really what I'm going to 1:07 charen cover with you today I'm not gonna do in any order it just as it pops 1:11 into my head 1:12 I'm so happen to any slice it takes you through its 1:15 I'm is going to try and do it more on the hoof I'm 1:18 and if I sound a bit croakies so I i I've only just got my voice back 1:22 my wife was very happy the bout that but I so I miss going to quickly go through 1:26 the the main reasons why you 1:30 as entrepreneurs consultants find it very hard to actually raise money 1:34 I one of the first things that's 1:37 I I find a lot of one's business don't fully understand 1:41 is the difference in the type of money if you'd look at what angels a 1:44 looking to invest in and if you're looking at what VC's are looking into 1:48 invest in 1:49 it is I would say quite different ed 1:53 for the majority of them I know we've got some be like hoped people from 1:55 octopus here and they do too early a stage stuff 1:58 but of the about 1000 businesses I see 2:01 I would probably say about a 100 to 150 of them 2:06 I can been straight away and the main reason is as an angel investor I'm 2:11 on the whole not I'm majority angels will say this on the whole will not get 2:15 involved 2:15 in a company looking to raise more than a million pounds I 2:19 and you can catch conversely say that for the majority of the Seas 2:23 they do not get outta bed as they you know I think islamic amber one said 2:27 for companies looking to raise less the or more 2:30 or less than 750,000 so 2:33 you know make sure you know who you are investing with an and 2:37 when you're talking to angels they will do very simple deals 2:41 if got understand the difference I'm attachments that come with the money 2:45 the seas are investing other people's money they will have to go through a 2:49 very rigid 2:50 I'm process before open any money n 2:53 you're fine with angels because they'll do slightly earlier deals and it's their 2:57 own money 2:57 they're much more likely to willing to take a punt so if you if you're going to 3:02 a VC and you're saying i won one and a half million pounds 3:06 I've got this idea but I don't have a product I don't have 3:10 any revenue then ninety-nine percent to them will say 3:14 we really like your idea but come back to us 3:18 in about a year or two years time when you've got some revenue 3:21 and you're just wasting probably that time and your time 3:25 you know so if you are a very early stage business 3:28 on the whole look to raise it and now they don't need to raise more than a 3:32 million pounds 3:32 as a startup certain sectors I might be different 3:36 but on the whole for technology-based businesses you don't need to raise that 3:41 much money 3:41 so you're going to go down the angel route 3:44 to start off with I'm the 3:48 the other thing that I see I see about I would say 3:52 three to 350 presentations 3:55 a year and I am amazed to you 3:58 I say this but I would say about 75 percent 4:03 businesses don't describe their business within the first 4:08 two minutes over the presentation now the weather always explain it to 4:13 people when I'm talking to them about what they should do when they're 4:16 pairing for to do a presentation is 4:19 thats I'm is like an interview 4:22 even though it's I'm sure laws will say this is illegal to make up your mind 4:27 you most interviews are over within the first I would say minutes for them 4:32 actually happening 4:33 you made up your mind and it's the same for presentation 4:37 especially for someone like me who sit through so many of them 4:40 I am you that you have a minute or two minutes and I want to hear 4:44 what is the problem you're solving and how you're going to do it 4:49 I you can give me the rest later but I'd need to know what that 4:53 the the problem is and even gets worse when 4:56 I'm I once or business plan it was one other 5:00 best present a business plans ever seen a hundred pages 5:03 for start-up businesses do not need a hundred page business plan your business 5:07 plan should be 5:08 twenty or thirty pages max min was amazing about this business plan and I 5:12 have to say I did read it from 5:14 back to from the front to back even and twice 5:18 just like I just can't believe it at the end there at the nationalist and what 5:21 that what they were doing 5:23 I did not understand what the product was it was attacks so technical 5:28 I was sitting at an add on some the problem I don't understand those 5:31 thinking how long that these people actually spent 5:34 I'm writing this document which as you all know is a 5:39 you know on spinners your business plans will change speci 5:42 at the beginning over the life cycle of your business probably every week if no 5:46 every day 5:47 so it don't get too caught up the most important document 5:50 that you're going to have is actually the executive summary 5:55 that that is what you're going to be sending that we should be sending to 5:58 investors to start off with and then if they're interested after that your 6:02 business plan 6:04 well I'm you consent to them and you can guarantee that majority of angels 6:07 will help you be right to business plan before they make any sort of investment 6:12 I'm and getting a deal done I'm David Cass cool 6:16 I am who spoke he was actually one %uh the company's I invested in 6:21 I'm and one of the reasons I think that he took our money is 6:26 as well as others is that 6:29 when we went to him I took a whole 6:33 but the whole syndicate was already formed 6:36 I'm it is very will the first person that you want to find 6:41 as an investor is you lead investor 6:44 doesn't have to be the biggest investor I am thats 6:47 a the is it of the round that you're raising 6:52 there has to be somebody that can pull everybody together 6:55 because as we do as he talked about it took me years to raise money and it can 6:59 be quite 7:00 and I is quite a short time to do it but if you're trying to raise money from ten 7:04 different individuals 7:07 I and that were asking questions and knees a you're not gonna have any time 7:10 to run your business 7:12 and be to get across the finishing line is going to be extremely difficult 7:16 a mostly investors would have had experience a 7:19 doing one or two deals slain know how they can save 7:22 themselves and thus the company money and can they can get 7:25 deal across the line and I think that is actually quite critical 7:30 so don't go and just talk to anybody and everybody in trying to say we've got ten 7:34 people interested 7:36 if you don't have somebody who can actually get the deal done 7:39 because what you mean is that all the questions will come through one person 7:43 and not 310 C-one have to spend all of your time 7:47 I'm running around on think will be the same question 7:50 ten different times now if you talk to 7:54 any angel and they say what is the key reason 7:57 why deals don't happen after you've got the investor interested 8:03 pretty much every single time they will say 8:07 valuation we couldn't agree on the valuation I probably would say for 8:10 myself is about 75 percent at the time 8:13 after I get I'm really excited about a deal my start talking to the 8:17 the orange inner I Anissa something I 8:21 try and deal with as early as possible but you have to realize is that 8:26 worse feet in your mind it is a guaranteed 100 percent success this is 8:31 going to be 8:31 make money it's going to be the next Google it's going to be the next 8:33 Facebook 8:35 I see a thousand businesses a saying tell me exactly the same thing 8:40 I am and it's important that you have 8:44 I am all the confidence in the world but 8:47 I've been doing this for eleven years now or maybe even overly cynical 8:50 but I'm very cynical about it and I want to make sure that 8:55 the company's the that I do invest in that you end up being successful 8:58 can actually pay for all my company's I invest in the aren't 9:03 I am same goes the valuation do not comment say I'm a pre revenue base 9:08 business 9:09 and I am worth two and a half million pounds pre money 9:13 and I'm raising half-a-million I hope from police eighty well thank you but no 9:18 thanks 9:18 or you know I can by myself and actually massive mansion 9:22 in central London for vote for your idea 9:26 I'm and the important thing is when you talk to you lawyers we torture advises 9:31 try or you just go to knit you talk to other in sickness 9:34 trying get a feeling for what is a realistic valuation of your business 9:39 I'm there is no there's no way you can value-free revenue base business 9:43 on the whole you can the finger in the ass stuffed you can do everything 9:47 so year it does say the company's going to be worth five million 9:51 I in two years time and I've just worked it back now and 9:54 or I'm going to give away a certain percentage ovett actually 9:57 are asked the investors say what do you think 10:01 the value of the business says talked to a number of different investors 10:05 and if they're all telling you roughly the same amounts 10:08 that's probably what the value of the businesses I 10:11 and if it's not all the body that you want it to be or needed to be 10:15 look at what actually with you know what are the valuation most things within the 10:19 business 10:20 a lot of companies do not understand war she will add value to the business 10:25 be its somebody with it working with industry knowledge 10:28 somebody contracts revenue would have it try and understand where that's coming 10:33 from 10:34 and and also
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