Funding GuidesThe Investor Funnel: Serial Investor Peter Cowley shares how he filters opportunities
Peter Cowley
Serial Angel Investor
May 16, 2018

So you've made contact with a busy invested investor.  How on earth do you get from that initial contact to an investment?  In the last 36 hours, I have been sent 9 pitch decks. I invest in about one in every 200 plans that I see.  How does the entrepreneur beat the odds and the active angel find the gold nuggets from river? And how and when to say no?

Not all angels receive over 1000 plans per year, but all receive more than they invest in.

As I always say, warm introduction makes a huge difference – probably twenty times better, as the opportunity has been vetted, mentored and supported by a fellow angel.  But the entrepreneur cannot necessarily make contact with an angel, so deals will be sent cold to angels and angel groups.

As is said by angels all over the world, we primarily invest in people.  The founding team needs an idea, and friend, entrepreneur, investor and academic, Jack Lang puts it succinctly as:

A global, sustainable under-served (or unmet) market need

Global – ambitions to expand outside the startup’s country

Sustainable – business model that will last, in principle, forever

Under-served – there could be competitors, but the market is large enough for multiple suppliers

Unmet – if the need is unmet, then the startup may have to educate the market (a frightenly expensive prospect) or the market may not be ready – compare the Apple Newton with the iPad – similar products but introduced 17 years apart, and the iPad has been 10,000 times more successful

Market – the product/service is capable of being profitably monetised

Need – the market has a need, not a wish or desire

So how do I filter?

I do that by looking at the team BEFORE I look at the pain they are solving and the market.

And I commonly reject an opportunity before looking at the business idea.

Resources to look at the team include LinkedIn, and any CV attached to the email.  Both, of course, are produced (and can be spun) by the entrepreneur, but should give an idea of education and experience. Chronological gaps stand out and are a potential reason to reject.

I also look at the UK’s Companies House, a free public record of corporate history and directors.  This may show little, if the entrepreneur is first-time or under 30.  Otherwise there may be information on previous companies of which they were directors and the company's outcome (sold, solvently closed, insolvently closed).   If the entrepreneur was a director of a similar named company that has closed, which is surprisingly often, this raises questions.

Finally on people, if the team slide is missing from the pitch deck, then that is a rejection, if the team is towards the back of the pack and sparse, then that doesn’t help.

What do you think?

This article is a short insight in to my thoughts on processing the investor funnel, which will form part my next book: The Invested Investor. 

What do you think? Let me know your thoughts by getting in touch here.

Peter Cowley
Serial Angel Investor
May 16, 2018