How to approach VCs and angel investors

Getting investment in your business is a milestone for any startup. It’s recognition of your achievements so far, a chance to realise strategies you’ve worked on for years and the beginning of the next chapter in your growth. It can also be complicated and make or break the business you’ve sacrificed time and money to build.

So how do you go about finding your investors, how do you start those conversations and what do you need to have prepared?

The first question to think about is whether you want to opt for a venture capitalist (VC) or angel investor. Both groups invest in early stage businesses, but which you opt for depends on how much investment you are looking for, what kind of help or involvement you want and whether you are likely to need follow up funding down the line. One thing is for certain, both kinds of investors will expect equity in return for their funds and expertise.

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What’s the difference between angel investors and venture capitalists?

Angel Investor — a high net worth individual looking to invest their own money in exchange for a minority stake

Venture Capitalist (VC) — a private equity group that invests in scaling businesses in exchange for equity

Finding the right match

Once you’ve decided which option is best for you, you’ll need to identify the VC or angel investors that best suit you and your business. Like any professional partnership, entering into an investment process will require working closely together, sharing goals, and understanding the motivations of each party. The right investor can bring far more to the table than just money and if they already understand your industry they can bring knowledge, connections and experience.

Most VCs and angel investors tend to invest in sectors they are familiar with and will be on the lookout for the next disruptor in their industry, so getting out amongst your peers, joining networks and attending events is a great way to build connections.

Since angel investors are high net worth individuals investing their own capital, the routes to investment can tend to be more private and based on who you know. If you would prefer to raise funding from angel investors it is imperative that you work on building your network and becoming well known in your industry. Increasingly, investors are creating and using WhatsApp communities to connect with businesses and make introductions. A word of warning though, there are also some scams operating in fake investor WhatsApp channels, so always ensure you’re joining a bonafide group through their company website or by invitation from a known contact.

Being introduced to an investor through a ‘warm’ connection can also really help to get the conversation going in the right direction. For this reason it’s important to nurture relationships not just with your target investor, but with other influential figures in their orbit - the more noise they hear about you and your business before you start talking, the better.

VCs are also often listed on public databases like AngelList, Crunchbase or PitchBook. So, with a bit of research of prospective partners’ portfolios, you could find the perfect match before approaching them.

What to Prepare

Before starting any meaningful conversations about investment it is prudent to have a pitch deck ready. The process of refining your elevator pitch will also help align the leadership in your business around what you are asking for, what you bring to the table and how you want to work with your investors.

If your concept is difficult to articulate or has any complex technology, a short video explainer can also be a great way to demonstrate your business succinctly.

All investors are looking for ROI so having a really clear grasp on not just what you want to do with the investment but how you will do it, and projections on returns is key. Whether it’s entering new markets, diversifying your offer or developing proprietary technology, investors will want to see clear evidence your concept is scalable and their investment will provide good returns.

Making the First Move

Once you have your pitch deck ready, the next step is to make contact with investors. Early stage investment is as much about the people as it is the product so this is an important step to get right. First impressions are important, so you should avoid sending your pitch deck without trying to build a relationship and connection with potential investors first.

A key point which is often overlooked is explaining to the investor why they are the right fit for your business. At early stages of growth the investor and business relationship is vital to success, so it’s important to make sure they understand why the partnership would work for you both. This is where your research into investors will come into play and you can demonstrate you understand their motivations, portfolio of existing investments, and what they could bring to your business outside of the money.

Choosing international investment

For many businesses, investment is an opportunity to expand overseas and enter new markets. For this reason, the VC or angel investor that is the best fit might be located in another country. In addition, depending on what your business does, you might find foreign investors are more familiar with your concept or more open to investing in your idea than those nearby.

This means you also need to be prepared for receiving funding in another currency.

Traditionally, if an investor sends money in their local currency, your bank converts it, often with high fees and associated FX risks. A Wise Business account allows you to receive money in more than nine currencies, including GBP, EUR, USD, AUD, with local account details meaning you can choose from investors all around the world.

Being able to receive funds in other currencies can also help build trust with your investors, proving that you’re set up with the right infrastructure and saving them time and money on the transfer process.

You can also send money in over 40 currencies to over 160 countries, this also means you’re set up for fast international payments to help facilitate your international growth.

Ultimately, whoever you receive investment from, getting an injection of funds and the expertise of a VC group or angel investor is a pivotal point for any scaling business. Finding the right match for your business is vitally important and should be a two way process for you and the potential investor. Preparing for those conversations, building your network and thinking about how you will receive investment, is all important groundwork to ensure you can focus on the partnership and scaling your business together.

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