A useful side effect of my job is learning from my mistake and from the mistake of others at the same time. I am a former programmer who went to law school, nowadays I am a happy part-time lawyer and a part-time investor. Thanks to my job I came up with a surprising analysis on what drives a business angel to invest in a start up and refuse another, and this is exactly what I want to share with you today. Of course this is not confidential (we lawyers are a bit paranoid about confidentiality) but I bet that the result is very different from what you thought.

Learn from the largest equity funding in Europe and Asia.

The analysis comes straight from Bill Morrow, founder of Angels Den – the “largest equity funding facilitators in Europe and Asia”. I had a chance to have a chat with Bill during a conference, and he’s clearly a guy who doesn’t make much mistakes. He has founded and sold companies for the last 25 years, and his ‘Angels Den’ is a very successful syndicate focused in funding small enterprises and innovative projects.

So it’s interesting to see that even he himself looked a bit surprised by the result of his own analysis.

Angel investors look for return on investment … or maybe not.

What’s the most important factor to convince an Angel to invest on a project? Everybody’s first reply might be return on investment (ROI). Well, “everybody is wrong” (quoting Bill).

On a research made on more than 400 angels of the Angels Den network, return on investment was only the 3rd reason in choosing a project. The 2nd placer is “giving back to the society”. The average angel become rich in his ‘30s and very rich in his ‘40s. He spent an average of 16 years focusing on one thing – making money – and in being successful he needs a “new reason to wake up in the morning”, so he decides to help the community. “Not to mention the ego, 97% of the angel are male and egos play a big part of it” (again quoting Bill).

If you are thinking that this a bad drive, think again. Personally, I don’t care if the reason of investment is to pamper their ego, they are doing good after all.

So what is an Angel Investor really looking in a company?

So “making (more) money” is only the 3rd reason to invest in a project. And “giving back to the community” is 2nd. Then what’s the no. 1 reason?

And the winner is: “having fun!”

True. “Having fun” and new challenges is the first reason to convince an angel in investing in a project. This is why a business plan of hundreds of pages is rarely seen in my job, it’s not fun. Personally – when I teach – I suggest to my students a 4 page keynotes and a video with a personal touch.

Do you have a non-profit project to fund? Well fun is not enough.

You might think that if angel investors mainly look for fun, then it’s finally the time to draft a pitch for your non-profit and charity project, and milk their money for a better world. Well, not exactly. For Bill it is very hard to bring up a non-profit project, in his own word “there are many people out there that give money to charity, and some are angel investors. But they don’t do charity with their angel budget”.

But if you can find a way to make the world a better place without losing money, it’s worth a shot. And if the angels don’t listen to you, try me. StartupAgora is not for profit, and I am always curious to find new way to change the world.

written by Stefano Tresca of StartupAgora, a site for tips and insights on entrepreneurship. see more.

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