As a follow up to my last post on timelines to getting angel financing, in this article I will talk a bit about how the process can be done quicker.
Recall in my last post, I mentioned the timelines were based on a scenario of applying to an organized angel group. This naturally introduced some time overhead to go through a selection process in advance of presentation to the group’s members. One way to speed things up is to try find one angel investor that can meet your initial financing requirements. You will cut down the time required to make your initial pitch as well as make the whole process of due diligence and term negotiation quicker as you will only be dealing with one person and not have to deal with many different people with different viewpoints, priorities, and schedules.
On the flipside you may not find one investor that is comfortable with focusing that much captial on one venture. Many angels prefer to invest smaller amounts across wider number of companies so they can mitigate their risk. If you do deal with a group of angels, make sure you identify a lead angel in the group that can help be your company’s champion and help keep the group focused and provide leadership to driving the deal to closure.
Also recall in my last post, a lot of the time was spent going back and forth to agree on terms and get the legal documents finalized. It goes without saying that for your company’s lawyer, make sure you have one that has done angel deals in the past, is experienced with the main investment terms used for these types of deals, and will be able to be responsive during the timeframe when required. You may be thinking, if this takes so much time, why don’t I just draw up all terms & conditions beforehand so when I present to angels I have this all completed. You can do this, however it heavily depends on your situation. If your company is viewed as a ‘hot’ deal with a lot of interest or if you already have lined up a couple of lead investors and are just looking for some additional investors to top up the round, then this may work for you. Angels may feel they need to accept your terms if they want to particiapte in the deal. On the other hand, if your company does not stand out from the other deals on the go and angels do not feel they need to take your terms and want to invest on their own terms or structure of financing, then you run the risk you spent all the time and money to prepare these documents only to need to have them extensively revised.
As I said in my last article, the best thing to do is start early and in particular start to build up relationships with people who will be able to help you during the financing process. If you take a step back, think about what you are doing. You are getting in front of a group of people, probably most of them you have not met before, and then asking them to collectively invest six figures of their personal money into you and your company. This takes a level of mutual level of trust from both sides that is going to take time to build up. I’ll talk about this in a future article.