Are you a startup that needs investment to grow? Many entrepreneurs these days are turning to angel investors, typically a group of affluent individuals who provide capital to a business in exchange for convertible debt or ownership equity.
In my work as a business coach, I go to a lot of pitch events and see startup founders who end their presentation with an ask for money. The challenge is that many of them are ill-prepared to answer the questions necessary for an angel group to consider investing large amounts of money with them.
It was with that in mind that I wanted to write a series that would educate startups on different angel investors and how to best be prepared when approaching them. In our first spotlight, I chatted with Paul Clark and Eric Thome, two of the leaders at VentureSouth. Here is a portion of that interview:
Q: How would you describe VentureSouth?
A: We are an angel investment network that develops and manages angel groups and funds. Our 200+ members are accredited investors who contribute capital and expertise to early stage startup companies who are located in the Southeast U.S. We meet monthly to evaluate new opportunities, review due diligence, and make investment decisions.
Q: What are the three most important things you look for when considering an investment?
A: First, we look for a strong team with a passionate leader who is coachable. It is important that they compliment each other in their areas of expertise, such as sales, tech and/or past experience with startups. Next, we seek businesses that are defensible, scalable and capital efficient with the potential to deliver significant returns to our investors. Lastly, we focus on Southeast- based companies that are looking to raise $250,000 to $1 million in preferred equity.
Q: What do you mean by “defensible” and “preferred equity?”
A: For us, companies that have a unique technology, strategy or patent are defensible in protecting themselves from competition. With regard to preferred equity, while convertible debt has become popular and may be appropriate in certain cases, VentureSouth prefers to own a significant minority equity stake in a company with certain protections versus common stockholders.
Q: How does a startup decide which angel investor group is right for them?
A: Initially, in addition to capital, a startup needs investors who can provide strategic advice based on experience in their sector, as well as connections. More broadly, they should research the investment parameters for an angel group to ensure they are aligned and offering appropriate deal terms. They should also understand the group’s investing process and timeline.
Q: How does a startup entrepreneur explore working with an investor?
A: We start our process by evaluating a company’s pitch deck and executive summary either in an introductory email or through a warm introduction from one of our investor members or portfolio companies. Founders can learn more about us and our process by visiting venturesouth.vc/pitching-process.
Thomas Heath, CLC, is a business coach, strategic advisor and founder of Thomas Heath Coaching. Have a question? Planning a great startup event? He loves to respond to our readers. Contact him at Thomas@ThomasHeathCoaching.com or on LinkedIn at www.linkedin.com/in/AskThomasHeath.