5 things startups need to do to woo investors

As the largest angel-fund organization in the Florida, Tamiami Angel Funds has considered close to 5,000 investment ideas from entrepreneurs seeking funds to grow their early-stage companies since we were founded in 2010.

Because we manage four angel funds and have recently surpassed $25 million of invested capital across 38 portfolio companies, the members of Tamiami Angel Funds have a special perspective on what it takes to earn our backing.

Although a highly risky asset class, angel investing is an important source of financial support and mentoring for new and emerging-growth businesses. Our investors help entrepreneurs before they seek venture capital but after they’ve exhausted money from friends and family.

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Our members are high-net-worth individuals or family offices who qualify as accredited investors.  Across all four funds, our members place bets with their own capital and provide mentorship to our entrepreneurs in the startup phase of a business. The origin of the term angel investor can be traced to Broadway productions in New York City in the early 1900s, where such individuals funded large theatrical shows. The concept migrated to Hollywood for movie productions and ultimately to Silicon Valley. The term is now ubiquitous in the entrepreneurial landscape associated with emerging and fast-growing technology firms. By contrast, venture capitalists invest other people’s money in later-stage companies.

As Florida-based angel investors, we consider these the five most important investment considerations of an early-stage business:

1. The product or service must be commercially available and have a clear and meaningful point of difference from their competition. It must be a minimum viable product, meaning it has enough features to attract customers who can provide user feedback for rapid improvement.
2. All patents, copyrights and trademarks must be owned by the company. They are the keys to the kingdom; a business cannot rely on intellectual property held away from the firm.
3. Founders and management must have a primary focus on the business seeking funding. It can’t be a side hustle. The founders and management must also be qualified to launch the business and recruit high-performing team members. They must show they can manage the business to key performance indicators, which are milestone and targets to measure progress resulting in better decisions.
4. A company must have a governing board of directors or managers or at least have a commitment to establish one after the investment. A board of directors provides strategic planning and oversight and will look out for shareholder interests. Tamiami Angel Funds will often seek a seat on a company’s board or be an active observer as part of the investment.
5. Technology is key because it can help a business scale revenues and profits. Using technology, the business can handle exponential growth to tackle a large market or dominate a niche market.

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If you’re an entrepreneur who has exhausted friends and family funding and grown your early-stage business to the point where it meets our criteria, you will want to pitch our investors. Consider these tips to prepare:

• Summarize your situation briefly. What led you to embark on this entrepreneurial journey?
• State your idea in the simplest terms possible. Can you do that succinctly in the short time it takes to ride an elevator? Practice your elevator pitch.
• Explain how you make money. The more specific you can be about how you generate revenue, manage expenses and create profits, the better.
• What are the key benefits of your product or service to customers and investors? Think even more broadly and explain how it makes the world a better place.
• Show investors the next steps your business will take with investor money. How many more customers will you get? What new features will you add to your product or service?

Tim Cartwright is chairman of Tamiami Angel Funds, general partner of Adrenaline Venture Fund and partner of Fifth Avenue Family Office in Naples. He is also a director of the Florida Venture Forum and chairs the Florida Venture Education Foundation.