Worthworm Wisdom

Insights for entrepreneurs & investors

2014 Angel Investment Outlook Report: Inside the Mind of an Angel Investor in America (2)

Posted by admin on 2013-10-05 03:49:20

While we often speak of best practices to pitch angel investors, what we don’t often hear about is direct advice from them on realistically valuing a business, what irks them the most, what their likes and dislikes are, and what irritates them enough to end a meeting. See Part 2 of the results from our 2014 Angel Investment Outlook Report. 

In Part I of this series on Worthworm’s 2014 Angel Investment Outlook Report, we learned why angel investors fund companies and some of the main reasons they regretted investments made this year. Results from the second part of the report proved equally fascinating.

Our study, which was conducted by OnePoll in mid 2013, reveals that angels are looking for new, exciting ventures that fill a market void and could become the wave of the future. They also know what they don’t want: for that wave to come crashing down. In fact, angels in 2014 are on the hunt for distinct funding proposals. Their inboxes are overflowing with appeals, so they’re looking for proposals and ventures that pop, making themselves known. In addition, angel investors are especially interested in whether or not a venture has sustainable competitive advantages over their competition—nearly half (49%) of angels deem this necessary—and 42% of them are checking resumés. That’s right: they are more likely to invest in entrepreneurs who have relevant business experience.

Worthworm 2014 Angel Investment Outlook Report - Question 4

Perhaps most importantly, our research shows that flawed financial information is the biggest reason for angel investment regret. The fact of the matter is that if entrepreneurs don’t want doors closed in their faces, then they have to do their homework, and must prove that they can efficiently scale. Nearly one in every two (46%) angels noted that their biggest frustration with proposals is that entrepreneurs are overly optimistic when valuing their ventures, which translates to a warning: A dose of optimism is good when you’re having a bad day, but if serious investment support is what’s on your agenda, then ground yourself in reality. In other words, angels want business partners who know how to appropriately track and value a company’s worth. They want the numbers to add up.

Worthworm 2014 Angel Investment Outlook Report - Question 5

Angels also appear to have a positive outlook on investing in 2014. About half of the people surveyed indicate they plan to increase the number and/or dollar value of their investments, mostly due to the improving economic climate or the availability of more financial resources.

Worthworm 2014 Angel Investment Outlook Report - Question 6

Overall, this survey provided valuable insight into the mind of angel investors, in addition to tips directly from the investors themselves on how to improve the success of your negotiations. That’s why Worthworm was created as well. We don’t want a promising transaction to go awry between an entrepreneur and prospective angel investors because of misguided and indefensible valuations. Worthworm will handle that piece, providing all parties with a credible and realistic value with which angels and entrepreneurs may comfortably begin their negotiations.

Curious about how much your venture could be worth? Or looking for a world-class teaching tool? Or are you trying to do due diligence on potential deals?  Then try a subscription to Worthworm, and let us help you.