Most entrepreneurs have several ideas floating around. Deciding which idea will create a winning business can be difficult, even for experienced entrepreneurs. Creative entrepreneurs are no different. But, as I talked about in a previous post, piquing the interest of an angel investor will depend on which idea you are cooking up to present for funding. In truth, angel investors can’t predict the future any better than an entrepreneur, but they do use a variety of evaluation techniques to help mitigate the risks of loosing their money, and increase their chances of helping you succeed. In Winning Angels: The 7 Fundamentals of Early Stage Investing, the authors highlight the idea that “valuation is what [the angel investor] is willing to exchange for something else [they] want (145).” As a creative entrepreneur building valuable idea can seem daunting, but in light of this statement, you can see how value is in the eye of the beholder.
Angels who invest in artists may or may not be looking for financial returns. Perhaps they are looking for access to other artists in which to invest or building their reputation as an investor for the arts. Maybe the angel adores your kind of art, and wants to see more of it in their community. But always, always, an angel investor is looking at you and your potential to succeed.
So, if you think you have a good idea that is financially beyond your budget, a great way to convince angel investors that you have potential is to crunch the numbers and show them the value in your idea. If they invest in you, how will they see a return on their investment? Granted, some angel investors most definitely want to see their cold hard cash returned with change, but you may be surprised by someone who wants to simply say they helped an emerging artist. When figuring value for a stakeholder, you should present the cost to start the project, how much it will take in ongoing costs to see the project to completion, and how you expect to profit from the endeavor. Be thorough and specific in each area, and make a point to show the investor what their role will be in the process. If numbers aren’t your thing, seek out someone who can help you see the project through a financial lens.
When you come to an angel investor with a solid plan that includes strong financials, you are setting the stage for an angel investor to see you as a valuable asset to your project or business idea. Some angels decide how to value their investments very quickly and others may take a well-worn path to valuing their investments, choosing to work like venture capitalists, or academics who multiply and discount cash flow. Suffice it to say, if you are looking for an angel investor who uses sophisticated methods, then perhaps you have already graduated beyond emerging artist and have cooked up a delicious idea that goes beyond just completing a project.
I would like to share the story of Johanna Basford, adult coloring book artist extraordinaire. Basford is a Scottish illustrator who studied textile design. Soon after graduating she began a small business, drawing wallpaper designs. The recession hit, and she folded up shop, realizing her heart was more aligned with illustration than textiles. She began seeking jobs as a freelance illustrator and eventually landed work with corporations such as Nike, Absolut Vodka, and Chipotle. She was approached by a publisher to make a coloring book for children, but asked instead to make one for adults. She drew five pages, and began her journey as a coloring book illustrator. She has sold over 22 million books in over 40 countries! (I have three of them!)
Johanna’s story sheds light on how an artists can grow and offer value to an investor. From humble, free-lance beginnings, to corporate illustrator, to coloring book giant. Just like not all businesses make it to greatness, not all artists do either. Nonetheless, angel investors like to take chances that their investment could pay off in a grand way. So, build value into your creative ideas, don’t be shy about asking for the support you need, be stalwart in your effort to prove your idea to angel investors.