Tips for Pitching to Business Angels

Guardian Angel by Bernhard Plockhorst

 

Jane Lambert

A business angel is an individual who provides capital to startups and other small and medium enterprises in return for shares or debentures. He or she may also offer advice, introductions to his or her connections and technical expertise. They are invaluable in that they are willing to take risks that would deter other investors.

The reason I am writing this article is that I recently attended a pitching event at which three business owners presented their investment proposals to a group of angel investors.  As the proceedings were confidential I can say nothing about the event other than that all the presenters were impressive and every proposition appeared to be viable.  

For those who are yet to make their first pitches as well as those who wish to learn more, I commend Stripe Inc.'s How to Pitch to Angel Investors by Stripe Inc.  According to Wikipedia, Stripe, Inc. is a multinational financial services and software-as-a-service company with offices in Dublin and San Francisco.  The article was last updated on 3 July 2024 and while it was not addressed to British readers its guidance is relevant to entrepreneurs in this country.

One of the questions that angels are likely to ask is: “What are the main risks for your business, and how do you plan to mitigate them?” Stripe offers the following answer:

"Acknowledge the risks facing your business, whether they are market risks, operational risks, or competition. Discuss your strategies for mitigating these risks, showing that you have a realistic view of the challenges and a plan to address them."

That is not so very different from tthe simple five-point strategy for start-ups and other small businesses that I suggested in Business Planning and IP: A Practical Example 4 April 2018 in NIPC Inventors' Club:

1. "Identify the main revenue streams for your business over the business planning period. List the profitable products or services that you supply or for which your receive royalties or licence fees.
2. Consider the likely threats to those income streams. In most cases these are going to be commercial. Competitors will launch new products, reduce their prices or maybe consumer buying behaviour may change. Only in a minority of cases will you have reason to fear copying of your designs or technology or adoption of similar branding.
3. Devise appropriate counter measures. In many cases these will be commercial too even if you fear copying or passing off. In some circumstances, launching a new model, re-branding, reducing your prices or finding new markets can be as effective and often cheaper and more certain than litigation. However, a commercial option is not always available or attractive. For those cases where it is not you may need to plan a legal response.
4. Choose the optimum legal protection. Put yourself in the position of your customer and consider why he or she is likely to find your product attractive. Is it its appearance, the way it works or the reputation of your business? If it is the appearance of your product you should see whether you can register its design either for the UK alone or the whole EU. If its your reputation you should think about registering your business name or logo a trade mark. If it is the way the product works or is made a patent may be the best option. If it cannot easily be reverse engineered you could keep it under wraps as a trade secret. Maybe unregistered design right will be enough. Factors to take into account will include the shelf life of your product, the size and value of the market, whether you want to sell it abroad and all sorts of other matters.
5. Make sure you can enforce your legal protection. Although bootlegging, counterfeiting and piracy are crimes as well as torts primary responsibility for enforcing your intellectual property rights rests with you. That means bringing infringement proceedings in the civil courts. In England and Wales the costs of a High Court action can exceed £1 million. In simpler cases that can be brought in the Intellectual Property Enterprise Court recoverable costs are capped at £50,000 for determining liability and £25,000 for assessing damages or other profits to be disgorged. There is a small claims track where costs are limited at a few hundred pounds for certain types of IP claims under £10,000. If you cannot afford such costs out of revenues then you should consider intellectual property insurance or other kinds of funding."

Most legal indemnity policies exclude intellectual property disputes.  For many years it was very difficult to obtain cover against the costs of IP litigation.  That has changed recently in that there are now several specialist brokers in this field.   The Intellectual Property Office has produced some excellent Guidance on Intellectual Property Insurance which was last updated on 21 Feb 2020.  The Chartered Instititue of Partent Attorneys publishes a list of brokers and their contact detail,  The Chartered Instititue of Trade Mark Attorneys has also compiled a downloadable list of IP Insurance Providers,  I have written extensively on the topic over the last 20 years and links to my articles  can be found at the foot of IPO Guidance: Intellectual Property Insurance which I posted to NIPC Inventors' Club on 25 Feb 2020/

Further information about intellectual property for presenters can be found in Enterprising Ideas - A Guide to Intellectual Property for Startups published by the World Intellectual Property Organization in 2021.  I would particularly commend the sections on "Other Strategic Ways to Exploit IP" between pages 38 and 50 which contains excellent advice on transactions with angels and other sources of finance and "Managing Risks" between 51 and 57.

Anyone wishing to discuss this article further may call me on +44 (0)20 7404 5252 during normal UK business hours or send me a message through my contact page at any time.