Approaching Angel Investors With a Realistic Plan


When deciding to approach angel investors, equity partners or venture capitalists, it’s important to have well thought out business plans that realistically present your case for funding and the probability of achieving profitability. Finding project funding is a challenging process and not one to be underestimated in terms of the effort required. Startup funding or business funding for projects is available, but the success of your funding search will be greatly dependent on your ability to present marketing and financial information in a way that makes sense. The proposals must be in-depth and reflect the extensive economic, marketing and financial research completed.

Entrepreneurs who have not searched for funding before will sometimes make the mistake of overstating potential sales or profitability. Angel investors are aware of this and will identify unrealistic projections quickly. All of the information included in your business plan will be scrutinized closely which means you must be prepared to show exactly how you developed it. It’s too bad that many quality business ideas die due to lack of funding because the angel investors believed projections in the business plan are unrealistic.


Same Attention to Detail

A good self-test to administer is to ask yourself if you would be willing to apply for business loans using the business plan that will be submitted to angel investors. Bankers are notorious for their ability to do in-depth analysis and to spot numbers or marketing data that is unrealistic. Banks are also famous for requiring what seems like dozens of forms completed, doing credit checks, analyzing current market conditions and making reference inquiries as necessary.

This is the same kind of review you can expect from angel investors whether requesting startup funding or project funding. Being prepared in advance to answer all questions that might be asked is crucial to success. Angel investors will do an in-depth analysis of your business plan that includes:

  • Analysis of the marketing plan as well as financial statements
  • Search for realistic detailed support for profitability estimates
  • Other types of funding that has been sought like venture capital in addition to the angel investors
  • Detailed strategy for use of funding and repayment of investment
  • Detailed descriptions of proposed business activities
  • Convincing arguments justifying investment

The convincing arguments are a critical component of the business plan. For example, the marketing plan should include realistic economic data and market niche information that clearly supports the financial projections. Angel investors consider the safety of their investments, and the more accurate and realistic sales and marketing projections, the safer the investments. Communicating the justifications for the investment will usually include meeting the angel investors and presenting your case orally as well as in writing.

Getting to the Bottom Line

Approaching angel investors is much like approaching other types of funders including bankers. Angel investors are risking personal funds though, and that means they will want additional assurances that the business plan is realistic. Getting to the bottom line is only managed after a detailed analysis of everything leading to that final profitability projection.


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1 comment

Akira Hirai 5 years ago

Julie-Ann - You're absolutely right about the need to get the plan right before seeking capital.

For an in-depth look at common mistakes entrepreneurs make when preparing business plans (whether for angels, venture capitalists, or lenders), see Why Business Plans Don't Get Funded at http://www.caycon.com/why-business-plans-dont-get-...

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