According to a report by the Angel Capital Education Foundation (ACEF) the angel investment process is typically comprised of 4 steps. It is important to know and understand these steps in order to successfully secure angel investment. According to the ACEF report only between 1 and 4% of entrepreneurs that apply for angel investment funding will make it through this 4 stage process to receive an investment. The 4 steps are as follows:
Executive Summary Round - This is the first stage of the angel investment process, also known as prescreening. Many angel investor networks will have a executive summary submission tool on their website, or at least an email for you to send initial applications for funding. This is probably the most important round because if you don't pass this round you will not have the opportunity to meet face-to-face with the potential investors. Only 25% of applicants will make it through this round. For this reason, your executive summary is absolutely vital. Make sure to read this extensive guide on how to write an executive summary at: http://www.theexecutiveplan.com
Investor Presentation Round - If you are luck enough to make it to the second round you will typically have the opportunity to meet with at least one of the angel investors that may make up the angel investor network. You will probably be asked to prepare a short presentation and then they will have an opportunity to ask questions. If you want to know how to make a powerful investor presentation I suggest reading Guy Kawasaki's book, "The Art of the Start." About 1 out of 3 will make it to the next round.
Due Diligence Round - This is the third, and probably the most intense round. At this point the investors are going to want to know everything there is to know about you and your business. Be prepared to answer lots of questions and provide the potential investors with a detailed business plan. If you have nothing to hide then this round should be a breeze. Only about 1 in 3 entrepreneurs will make it out of this round alive and move on to the final round.
Investment Round - This is the final round. You have made it through the executive summary round, the initial presentation round, and the due diligence round. Congratulations. Now you have about a 50/50 shot at receiving funding. You will probably be asked to come back in for a final investment presentation in front of the entire angel investor network. Sounds terrifying. If you are well prepared this round should be a breeze. The potential investors clearly have an interest in your business because they have brought you this far. Now this is your chance to get them to buy in to your vision and also to show them how they will make a lot of money of course.
This 4 round process is intimidating to most entrepreneurs and for 96 to 99% of business owners it ends in failure. If you get turned down once, don't let that get you down. There are literally hundreds of thousands of angel investors across the country and you just might be able to find the one that will take your vision and make it a reality.
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