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A Match Made in Heaven: Five Tips for Attracting Angel Investors

Claire England is the executive director for the Central Texas Angel NetworkIt's not every day the McCombs School of Business community has the chance to hear from representatives of some of the most active angel investment networks in the nation. At the Herb Kelleher Center speaker series on Feb. 24, Rob Tucci, advisor for the Houston Angel Network, and Claire England, executive director of the Central Texas Angel Network, were interviewed by former entrepreneur-in-residence Laura Kilcrease. During the talk, Tucci and England discussed classic mistakes that entrepreneurs make when pitching to angel investors.

Avoid a misstep in your next round of funding with these five tips:

Be coachable and have patience. The No. 1 factor for her network's members is people, England says. Difficult entrepreneurs are easy to spot, Tucci says, because they often become impatient or frustrated with how time-consuming the process is. "Our best investments are run by coachable people, because nobody knows it all," he says. "We don't want to invest in somebody who does."

Accept feedback. Angel investors look for people who are approachable and receptive to negative feedback, England says. While not all investor feedback must heeded, she stresses the importance of adapting to criticism. "I've seen pitches where an entrepreneur actually responds to investor questions in almost an attacking way, trying to challenge the investor and questioning what the investor should be asking," England says. Needless to say, the company wasn't funded.

Rob Tucci is an advisor with the Houston Angel NetworkStrong management is key. A management team can be stronger than the idea, Tucci says. He says he's told many entrepreneurs that while he didn't like their current company, they should come back to him with their next idea. "When you see what you think is good management, that’s something you want to invest in," Tucci says.

Do your research on crowdfunding. "Figure out if crowdfunding is the direction you want to go and how that will affect your ability to apply for and get angel and VC investment," England says. "The one thing you don’t want to do — if you know you're going to go to a series A or series B and pursue future rounds of angel and traditional VC funding — is shoot yourself in the foot with crowdfunding and risk that future investment." In a second round of funding, Tucci explains, potential investors are more likely to invest in a company that has been funded by "opinion leaders" and experts, rather than by random people on the Internet.

Don't ask for too much money. Entrepreneurs commonly make the error of giving their company too high a valuation, Tucci says. He says sometimes they don't want to put a price on the convertible debt for their company. The Houston Angel Network requires that the convertible debt be capped, so that in the next round of funding, it converts based on an independent valuation, with a maximum valuation of the set cap. 

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