Angel Tip of the Week
Think Like An Investor
Ninety nine (99%) percent of all entrepreneurs either fail to raise capital or they take
it under unfavorable conditions. WHY?
Because entrepreneurs think like entrepreneurs. The key to successfully getting funded is to think like the investor!
So how do investors think?
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Return on Investment: ROI = |
Future Value - Present Value
------------------------------- X 100
Present Value
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What kind of returns do investors want? It depends on the stage of the deal, but for very early stage ventures, the
ballpark ROI would be a multiple of 10 - 50 times the original investment. As an example, an investor would expect
to receive a minimum of $5 million for his/her investment of $500 thousand.
Angel investors and venture capitalists look to cash out (harvest) in the five year time frame. This implies that the
venture has survived and thrived for five or more years, that there actually will be a harvest and that there is a significant
Future Value (FV). It also implies that the Present Valuation (PV) was realistic.
The odds are that 80% of the investor's portfolio companies will have failed or will be inconsequential. Thus, each of
their deals must have "home run" potential to cover the failures.
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