One angel investor says getting funding for growing businesses can be especially difficult during times of economic uncertainty.
But despite the current market environment, it’s not impossible if the right steps are taken.
“Macro uncertainty generally means that when the stock market is not doing well, there may be fewer new companies being formed,” angel investor and entrepreneur Sarah Kunst explained on Yahoo Finance’s “Financial Freestyle” podcast (see video above or listen below). “Because of this, venture capitalists like me can’t get their early-stage investment money back because we typically get it back when the company is acquired through the M&A process, which also moves more slowly.”
Emerging entrepreneurs can still get funding from angel investors like Kunst, but they want to make sure their business plans are foolproof.
First, entrepreneurs must understand the growth potential of their industry. Kunst says she’s keeping an eye on the cybersecurity space for potential new investments.
If the market isn’t big enough for your business to grow and become hugely profitable, it’s going to be harder to get investment.
“It’s much easier to be a billion-dollar company in a trillion-dollar market because it means you’re still a big company,” Kunst explains. “As an investor, I could be investing at $2 million, $5 million, or even a million-dollar valuation, but I can still make a lot of money because I see a path where even if you screw up and have bad luck, you can still be that billion-dollar company.”
Angels also want you to explain why you’re the best person to start and run a company. If you don’t have experience in a specific field to back up your idea, it can be more difficult to get help from investors.
When pitching entrepreneurs, Kunst says she wants them to tell her about the ripple effect of their startup, the problem they’re solving, and the consumer base that’s willing to pay for their ideas. She also wants them to tell her, “This is why I fit in this industry. I’ve been working in this field for five years.”
“You usually see people with education, life experience, or professional experience in a field,” she adds.
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