Sometimes disruption opens the door to innovation. This was proven in the global financial services industry over the years since the Great Recession. Fueled by consumer-centric innovation and overflowing capital investment, the financial technology boom continues to show no signs of weakening. According to our friends at Fortunly, venture capitalist–funded startups collectively raised a staggering $39.57 billion worldwide in 2018 with a 15% jump in the number of deals inked year-over-year. Although some of the most valuable fintech companies on the planet today still run on VC money to stay in business, long-term patience-testing profitability issues have not discouraged investors from injecting tons of cash into the coffers of new players to challenge incumbent financial institutions and unicorns.
If you head a fledgling fintech, however, you need to convince angels first to take a chance on your company before seeking financing from more generous venture capitalists. It can be difficult to impress risk-taking investors. To raise the seed money necessary to prove the feasibility of your concept and take your startup off the ground, use the following tips to win over angels:
(1) Pick Your Angels Carefully
Beggars can’t be choosers, but, in this case, you need to be a bit selective in approaching angel investors. The perfect angel is not just rich. They also possess extensive domain expertise that can help steer your company in the right direction. You may be the visionary, but you need partners with experience in order to build a fundamentally sound business. When you open the door to angels, you will no longer be the sole decision maker. Therefore, it is imperative to find the investor you can work harmoniously with. Do your research to learn about the backgrounds and portfolios of your prospective investors.
(2) Conquer Your Stage Fright
Public speaking is a non-negotiable part of investor courtship. You should be able to confidently articulate your ideas at the very least. It’s not just about what you say; it’s also about how you say it. If your communication skills need work, practice your pitch to develop your confidence. Meeting investors for the first time can be nerve-racking, but your desire to make a difference in the world should be stronger than your fear of rejection.
(3) Have a Compelling Narrative
In order to pitch your fintech business to investors you have to tell a story. Like every good novel or movie, a startup needs a compelling narrative to grab the attention of investors and help them capture your vision. You do not need a killer plot to hold the interest of your prospective angles. Use visuals and the power of the spoken word to paint a picture of what you want to solve with your business.
(4) Say What Makes Your Target Market Tick
Make angels see how well you know your target market. You should have a very clear understanding of the fragment of consumers you want to serve. Your uncanny ability to explain what delights, frustrates, and motivates your target market could be your ticket to a successful financing round.
(5) Bring Your Top Talents
Let the angel investors meet the other members of your team. They can help you answer questions that are beyond your field of expertise. This will display the competence and team dynamic between you and your peers.
(6) Make a Demo
Sometimes, it is better to do than to say. If your fintech solution needs some illustration, don’t hesitate to draw how it works. If you have a prototype of your product, show it off. Getting your message effectively across is what matters most.
(7) Forget About the Features
A common mistake of aspiring entrepreneurs is talking more about the features rather than the benefits. It should be the other way around. Angels don’t need to hear a tedious explanation of what your technology does; rather, they want to find out why it matters to others. Get straight to the point, and the angels will appreciate you valuing their time.
(8) Fill the Gaps With Facts
Pepper your pitch with statistics to add legitimacy to your claims. Supplement your story and business plan discussion with relevant numbers and comprehensive studies. Cite examples of other comparative technologies and startups if need be to prove your point.
(9) Be Forthcoming
It should go without saying that you have to be open about everything. Unlike when you are bootstrapping your startup, pitching investors requires absolute transparency to interested external parties in order to earn their trust. Investors may let you get away with some sugar coating, but you should never lie by omission. Honest mistakes are one thing, but blatantly misleading your potential business partners is unacceptable. Remember that angels, themselves, are successful entrepreneurs. They will notice when something doesn’t add up. Embrace your weaknesses. Seed investors want to buy a share of your company in order to be an active member of your organization.
(10) Reconcile Ambition With Reality
Maintain a healthy balance between idealism and realism. You need to have big ideas and express hunger and determination to make them happen. However, you should not ignore regulatory constraints and other real-world limitations. Some businesses are really just hobbies that seem exciting but have little potential to grow. Make sure you present a plan that solves not only the inefficiencies or ethical problems you wish to address but also the financial objectives investors expect from your scalable and sustainable company.
(11) Cover the Exit Strategy
Your pitch must explain how you think angel investors will get their money back as soon as possible. Get inspiration from other fintechs that got bought or went public. Angels don’t expect to recoup their investment right way, but they do deserve a feasible timeline. Angel investing is not the only avenue to raise seed money, but the funds you can raise through it are worth their weight in gold. Getting a chance to pitch your fintech business to an angel is not something that should be taken lightly. Putting your all into your pitch could affect the future of your company.
Not Ready to Give Up Equity? These Funding Options Might Be for You
Fintech startups typically seek capital from angel investors after they’ve already gained traction in their business. However, if your fintech business is completely new (i.e. you are not generating any revenue) there are other sources of financing available. There are five stages of funding and angel investor funding is usually the second stage. The first stage is the “seed capital” stage. This is the stage where entrepreneurs invest their personal savings or use debt financing such as an unsecured business lines of credit or microloans to capitalize their business. These sources don’t require you to give up any equity in your company.