How to Close Angel Investors

How to Kill the Angel Investor "Deal-Killers"

Have you experienced the frustration of dealing with a self-proclaimed "interested" angel investor who you just cannot close, no matter how hard you try or how many months go by? If you have, read on.

After writing last month about angel investment "Deal-Killers," I received a slew of emails and calls from frustrated and angry entrepreneurs unable to close deals with angel investors. Many of  them had invested more than a few months talking to investors who had repeatedly expressed a commitment to invest.  Yet every attempt at closing the deal had ended in frustration. Some of the angel investors finally expressed a reluctance to invest at this time while others have just dragged their heels and avoided the subject. Either way, the result is the same. The frustrated entrepreneur can't get the money he or she desperately needs for their company.

As pointed out in the previous post, the resistance often stems from the angel investor's uncertainty over how they will get their money back plus any profit that may have accrued. To be honest, their fears are real. Minority shareholders in a small private company (i.e., a chronically cash-strapped one) are at the mercy of the majority who can easily find a hundred better uses for limited capital than buying out investors--especially the passive variety. Both sides always have a convincing rationale. The minority investor feels that it's time he was finally rewarded for taking a gamble on the company at an early stage. Meanwhile the majority are convinced that if they just hold onto that money for another six or twelve months, it will allow the company to hit a new plateau which will insure its long-term success.

Who is right? Probably both sides to a degree.

With this problem in mind, I have developed a tool for raising money which addresses the concern that all angel investors have about their exit strategy. Indeed, it tackles it head on.

Closing Angel Investors

This product consists of a book in pdf and an accompanying spreadsheet in Excel.  Contained within the package is all the knowledge you need to be able to utilize this innovative financing instrument to close the deal with angel investors. The instrument, called a Revenue Royalty Certificate (RRC), is a loan structure which clearly demonstrates to the investor how and when they will recover both their principal and profit while also receiving an equity stake in the company.

However, the RRC is not just about benefits for the investor. This instruments also offers substantial benefits to the entrepreneur. I am referring to freedom and autonomy here. With an RRC, the investor is unlikely to interfere with your management style as long as the payments are being made on time. The RRC is a win-win.

There are a few more bonus lessons contained within which reveal how sophisticated financiers select their target investors.

Price only $34.95 (USD). Don't lose anymore time spinning your wheels.

Do yourself a favor and stop spinning your wheels trying to do it the wrong way.

Comments

[Garreth]

Will this work for a pure service business?

[Umair Sada]

Here's another question...can this work with venture capitalists...or is it just for angel investors?

[FG]

Peter, I just finished it and found it very helpful. Is there any way to purchase an hour of your time to discuss a related issue?

[Peter]

To answer your questions:

1. Yes, it will work with service businesses.

2. Venture capitalists have their own way of structuring deals, so this instrument won't help you with them. It's for angel and business investors.

[Daniel Weinreb]

I'm a member of Common Angels, a relatively experienced and large angel investment group in Boston.

I agree that it's awful when investors drag their heels and don't really give you a "no" when that's what they really think. Common Angels has three full-time staff members: two executive directors plus an administrator. The executive directors are very professional and get back to everyone promptly. (I.e., not all angels groups are the same.)

I've never heard of the kind of deal structure you seem to be talking about. Why should the company pay back the investors monthly, like a mortgage? The whole point of that money is to provide working capital for the company, so it can grow. If you want to give them less money, do that from the start.

But I have not read your pamphlet so of course I am in no position to make serious comments on it.

[Peter Ireland]

Daniel,

The instrument, called a Revenue Royalty Certificate (RRC), is a loan structure which clearly demonstrates to the investor how and when they will recover both their principal and profit while also receiving an equity stake in the company. It's a hybrid instrument combining both debt and equity.

It provides capital to a company for a pre-agreed upon time period which can stretch anywhere from months to years. On top of that, it's highly flexible meaning that it can be customized to meet the needs of both parties.

RRCs have been used for decades because they solve the problem of, "How and when will I get my money back?"