The recent success of Souq and Careem has highlighted the impact that innovative startups can create, by disrupting legacy models. The Dubai government’s proactive support of this ecosystem, in conjunction with high profile instances of rapid expansion such as the previously noted examples, is encouraging entrepreneurs in the region to pursue their dreams and take their ideas to investors. However, despite the emergence of Angel Investors and Venture Capitalists, acquiring seed capital to escalate from idea to an operating startup enterprise, is a complex business. Let’s begin with identifying the elements that entrepreneurs can use to refine their pitch, in order to attract investors.
Firstly, the good news for startups around the world is that they have the investor’s attention. For instance, research that I recently came across, from StartAD, the Abu Dhabi-based global accelerator operating out of NYU Abu Dhabi, suggests that more than half of the regional angel investor community is prioritizing the UAE over other global markets – confirming the quality of startups emerging from the region and the interest being generated. The report suggested that FinTech startups are leading the pack, while artificial intelligence based companies are close behind as contenders. It also indicated that investors in the region are increasingly buying into the fact that startup funding support, early in the enterprise lifecycle, is vital to the region successfully transitioning from oil-dependent revenues to a more diversified economy.
Such proactive, positive and aspirational engagement between startups and angel investors is fairly commonplace across markets. Frankly, it’s easy to see why. Getting in early on the next big thing, and the incredible scope of the emerging generation of technologies, is creating a space in which innovations are flourishing. Investors know that backing the right innovation early can result in exponential returns, in the long term.
A few ways you can stand apart from the rest and put forward a compelling argument
Many new entrepreneurs are often confused and try to second guess what investors are looking for, consequently failing to pitch their ideas effectively. Funding from an angel investor, whether it’s a one-off cash offer, or ongoing support over the lifecycle of a startup, is vital to the venture, so knowing how to pitch is vitally important. The first thing to remember is that angel investors provide capital, connections and experience. This process is far from adhoc and investors usually have a set of principles that they apply to every business model and idea they are considering. Here are a few things to consider, to ensure that your pitch more compelling than your competition:
- Get your basics right
Remember that any investor will look for an inspirational founder, one who can do more than just talk ideas. They will look for a business leader who can deliver a good risk-adjusted return on capital invested. Attracting quality manpower to your business will also attract attention, so the rest of the team is critical as well. Many startups pitch great ideas, but lack the right people to manifest them. Investors are astute enough to know that the real test is in implementation and often strong teams are preferred to big ideas.
- Pitch to the right audience
Do your homework well and identify the right angel investor group that is most suitable for your business. It is important that you are aware of your industry dynamics and key business metrics when pitching, as well as understand the resources required to win. A pitch that you can substantiate with data demonstrates how prepared you are.
- Your business plan is your pitch
The careful consideration, that a well thought out plan conveys, can set your pitch apart. Angel investors know that if you can quantify your business model and strategy, you can be expected to identify ongoing issues before they become dealbreakers. A plan cuts to the chase and frames the opportunity far more effectively than any verbal persuasion.
- Let investors add value
Angel investors typically look to add value and maximize returns on their portfolio. They can take an active interest in the business either on the board of directors, an advisory board or by helping with network introductions, business guidance and founder mentorship. Angels are helpful with key strategic decisions or raising additional funds as well. Leverage their confidence in you.
- Be deal ready
Startups need to prepare and offer the background information that supports their business proposition, even after an initial pitch. Angel investors often conduct two to three meetings among themselves, to discuss the pros and cons of an investment. Having an engaging pitch is just the beginning, remember to take every opportunity to reinforce your case.
- Be realistic
Remember that while inflated numbers are not credible, smaller ones don’t attract investors. Be sure to craft a plan that makes, say, the fifth year returns worth the investor’s while. An angel investor with any past experience will have seen hundreds of proposals. A reasonable and realistic assessment of your returns is far more likely to be convincing than emphasizing a best case scenario.
- Early stage research vs. Proven business model
Above all, remember that angels mean business. Be persistent and patient, as these are seen as virtues by angels. A rejection may only be a temporary setback. If you hear, “come back when you have more traction”, take it to mean that a proven business model with a working prototype and perhaps even a customer or two, can get them interested.
Be sincere to your inspiration, and the enabling power will eventually arrive
While it’s important to learn from the insights of others, a particularly unique vision can sometimes demand more of you than ones that are relatively generic. I have always believed that being an entrepreneur is just as individualistic as being an artist. If you truly have something revolutionary and new to offer, chances are that it will take some time before others can see it too.
Ideally, balance is the greatest virtue in such cases. Don’t be so immersed in your original inspiration that you don’t craft it in practical terms. At the same time, don’t lose that initial spark simply to please others. Expect some resistance to your idea, but don’t treat every reasonable doubt as an attack either. It can be stressful seeking venture capital for the project of your dreams, don’t let it diminish your inspiration and enthusiasm, or the relationships within your team. Approach the world with positivity and, the chances are, it will reflect that same approach back to you.
