How to Reach for the Angels
Michelle Colbert, Founder, International Legacy Films
Last year, International Legacy Films, the company I founded in 1996, was in a fight for its life: the threat of a writers strike caused big corporate clients to cancel plans for the type of television commercials we produce. Having brought revenue to $1.6 million in 1999, just three years after inception, I saw that figure plummet last year to $50,000.
In the throes of an entrepreneurial crisis, I had a chance to reevaluate: do I want to continue in business for myself or do something else? The answer was obvious. For the eight years prior to starting my company, I had never been "employed." I had always free-lanced for production companies. A business of my own has always been, and still is, my dream. So I decided to regroup and redirect part of the company toward a new and different market: producing commercials for the Hispanic audience, a large, fast-growing and underserved segment of the American population.
In regrouping, I also for the first time considered a form of financing that had eluded me in the past: money from private individuals called "angels" who invest in enterprises they find promising financially or of interest personally. In the past, I had built my company with savings of about $20,000 and with a home equity loan of about $160,000.
Calling All Angels
But now that I was refocusing, I knew that I had outgrown homespun financing sources, such as personal savings and home-equity lines. Credit-card borrowing, while available, wouldn't provide enough to reach my goals of employing a full-time manager for a new Latin American division and attracting talented contractors able to produce high-quality work for that specialized market.
Only serious money need apply at this point. So it was time for me to face what had always been a stumbling block -- that angel investing was a milieu about which I knew very little. It was time to educate myself about this type of funding and to present myself as a candidate. In the past several months, I have been piecing together a plan for how to do just that, the elements of which I will share in this article.
For entrepreneurs interested in pursuing angel financing for whatever reason - be it to refocus an existing business or launch a new one -- what follows are the ground rules for getting into the angel game.
Research the Market
The first step is the most basic: research the market. Talk to people - in my case, I started with my accountant, who I thought might have personal connections. Read books. Surf the Internet -- these days it is an easy source of a wealth of information. Early in my pursuit, I found myself online for another matter only to stumble across an item listing 1,200 people interested in investing in early-stage companies in the entertainment industry. Finding contacts, in other words, can be a matter of the serendipitous click of the mouse.
Make a List, Check It Twice
Undoubtedly, the list of the 1,200 was precisely what I needed: names of people predisposed to investing in my type of business. With such a roster, I could match the focus and plan I had for my company with angels likely to invest. I would be less likely to be wasting my time and theirs when I made contact. But - and this might sound contradictory - don't make assumptions that other, presumably less-than-predisposed candidates, wouldn't be interested. When it comes to angel investing, you never know who will step forward.
Presentation, Presentation, Presentation
In tailoring your approach, understand that there are formalities involved and be prepared to work within the structure. Some potential investors prefer query letters and a business plan; others only the query -- or only the plan. It varies from angel to angel. Even as you are mindful of the protocol, however, recognize that it is what makes your work stand out that will result in an investment. So add creativity, something that's attractive to investors. In the case of my company, it's the new Latin American focus. Just make sure you package the creativity within the format they expect.
Once you've identified likely investors, honed your presentation and made the contact, be sure to follow through - by phone, email, or through your personal contact. It is that step that will lead to an interview, if necessary, or even directly to an investment.
Execution Is Everything
Having done this preparatory work last year -- call it the ABCs of angel investing -- I am planning to spend about six hours a week for most of this year executing on the strategy I have laid out.
Yes, it will be hard and dogged work; no one ever led me to believe otherwise. Of the 1,200 contact names I have, I will start with queries to about 300. Of those, I expect no more than a 3 percent return - less than 10 of those contacts will result in personal meetings, to say nothing of actual dollars.
I know there's opportunity out there. I also know that it takes money to fulfill my vision of redirecting part of my company into a new and potentially rewarding line of business. So I need to make myself available to the funding -- and to the angels.