The big problem with Angels is if they suck your time for a small check. You need to drive urgency to get them to close after one meeting. Review the textbook for tips on how to do this.
With Angels, your success will be based on how well you can drive a process.
You want to keep driving investors until you get a decision. This is the golden rule: A “No” is better than a “Maybe”.
So how do you get that.
Well, when you meet, these are the key questions to ask:
Are you interested?
What’s your usual check size?
Do you want me to hold your space on our round?
How much?
How long does it take to make an investment decision? What other information do you need?
When they answer this question, you want to push back if it’s unreasonable. E.G. If they say it takes 2 weeks, or if they have a lot of diligence requests, push back but not aggressively.
Examples:
“This is just our angel raise so we are trying to close in 1 week.”.
“For check sizes less than $100K, we are asking for no more than 2 meetings.”
Things NOT TO DO:
You have to decide in 3 days or that’s it.
Agree to a plan and then follow up as appropriate.
When you follow up, check back in with this:
1. Round is filling up through our reservations
2. These new investors have signed up
3. Updates about the product
Push them -- and be mentally OK if they say No
You need to have an ethos where you are driving the process forward. You can say “For checks less than $250K we are asking investors to make a decision by Friday.” Be mentally OK that they may say No. If you push them, you will lose some angels. But others will feel the energy of your momentum and that will compel them to step forward. And just drive a process where you line up a bunch of others and move forward.
You can also try some sweetner options to help them move forward, such as:
Increase the discount rate - The discount rate should not apply if you raise an equity round at or greater than your cap. So you can give them a new note with a higher interest rate.
Add an MFN clause - Add a Most Favored Nation clause to your note ensuring them that if you give an investor a better deal after them, they will have rights to that deal -- e.g. :
“MFN” Amendment Provision. If the Company issues any Subsequent Convertible Securities prior to termination of this instrument, the Company will promptly provide the Investor with written notice thereof, together with a copy of all documentation relating to such Subsequent Convertible Securities and, upon written request of the Investor, any additional information related to such Subsequent Convertible Securities as may be reasonably requested by the Investor. In the event the Investor determines that the terms of the Subsequent Convertible Securities are preferable to the terms of this instrument, the Investor will notify the Company in writing. Promptly after receipt of such written notice from the Investor, the Company agrees to amend and restate this instrument to be identical to the instrument(s) evidencing the Subsequent Convertible Securities.
Give them advisory shares (preferred over warrants) equal to 10% of what their equity would buy if the note converts at the cap.