Raising from angel groups for your climate startup

Raising money from an angel group is a vastly different process from raising money from individual angels. You’ll get a huge amount of exposure in one go, perhaps pitching to 50-70 investors at once, so it’s a much more efficient process - but one that comes with its own unique challenges. These angels will have high expectations for your pitch, and each member can bring their own personal biases and concerns to the group. So what do you need to know to successfully pitch these investors? 

Jordan Schwartz is co-chair of the screening committee for E8, an angel group which invests in cleantech and environmentally-focused companies. We sat down with him to get the inside view on how founders can get in front of angel groups, what members are looking for in a pitch, and how you can leverage the group dynamic to your advantage.

What is an angel group? 

An angel group is a confederation of individual investors, each with their own priorities. It’s important you don’t confuse it with a fund, as the angels don’t make decisions as one unit. The group comes together to hear pitches from startups, but each member will decide for themselves whether to write a check, and each builds their own unique relationship with the founder. It also differs from a syndicate like Climate Capital. In the syndicate model, a central team (or lead GP) is vetting deals, negotiating terms, and advertising to members who then decide on their contribution levels. An angel group is a much more involved process for all sides. 

The pitching process with an angel group

Getting your foot in the door
The way to gain access to an angel group will vary hugely depending on the group. With some groups, any angel can bring deals to the table, while others have a more administrative process where a committee will decide what pitches to hear. Sometimes a member will need to be a current investor in your company before they can put forward a deal, while others will simply allow you to apply. 

The pitch itself
An angel group will hear pitches from a small number of startups - perhaps three to five - each month. The format will vary from angel group to angel group, but generally they involve a short (10 minute) pitch and then some preliminary Q&A. The group will then discuss within itself the pros and cons of investing in your company, and there may be a straw poll to find out who’s keen to learn more. If a decision to move forward is made by the group, they’ll engage in a collaboratively run diligence process.  Interested members will jointly author a diligence report that’s shared with anyone in the group who’s interested, and they’ll each go on to make their own decisions about whether to move forward.

The funding amount
Because you’re dealing with individual investors, you often receive lots of smaller checks from an angel group, rather than one consolidated larger check, with check sizes typically ranging from $25K - $150K.  In some limited cases, Angel groups will structure an SPV or roll-up vehicle to consolidate investments into a single line on your cap table, but those cases are less common due to the fees and effort involved.

Navigating the social dynamics
Your chances of securing investment from an angel group are both helped and hindered by the group dynamic at play. On the plus side, people who didn’t express interest the first time around could be swayed by the contents of the diligence report - which resurfaces the deal and gives people a second chance to learn about your company - as well as the conviction of those who are interested. 

However, if someone in the group has a bias against your technology - for example, they have a particularly strong dislike of genetically modified food - and voices their negative opinion to the other angels, this can influence everyone’s perception of the deal. There’s also the fact that a little bit of knowledge can be a dangerous thing. If someone is somewhat familiar with a subject - say, they’ve read an article on it - there’s a risk they’ll believe more strongly in their limited expertise than is warranted, and again they might unfairly sway the group’s opinion. 

Find a champion
To get ahead of this issue, find someone in the group who’ll act as your champion and represent you in a positive light to the other members. Ask them whether they anticipate any snags, what questions they think will be put to you, and for insight on issues that might derail you. This will help you stop any potential problems in their tracks, or at least make you better prepared to face up to the angels’ scrutiny. 

You could also consider having an FAQ section in your data room and sending it to investors beforehand, which can help you control the narrative and nip their concerns in the bud. But angels are incredibly busy, so don’t be surprised if they don’t read detailed information prior to your pitch - they may prefer to simply have their questions answered directly. That said, setting your champion up to support your narrative can  be more effective and convincing.

Ensuring your startup appeals to angel groups

1. Offer an investable opportunity on a plate
A common refrain is that working with angels is all about relationships and demonstrating your passion, but at the end of day, angel investors are investors. What really matters is whether you’re offering them a good bet. You need to be very clear about your problem, solution, go-to-market plan, financial projections, and business model - make sure these foundational elements are rock solid and show unequivocally that it’s mathematically a good investment. 

Ultimately, the data points really matter. If you’re still at the idea stage, and you’re raising from friends, family, and individual angels, an angel group is likely not for you. Angel groups tend to have similar risk tolerance to a small institutional investor, so it’s best to approach them once you have some traction and can point to commercial metrics and milestones. This intense groundwork is justified by the check size and the exposure - trying to secure the same aggregate amount from individual angels may be more time consuming than it’s worth. 

2. Meet them where they are
Don’t write a pitch that’s full of jargon and relies on background information the angels don’t have. Remember that you’re an expert in the field, while they often lack in-depth knowledge of the sector - you need to be able to articulate what you’re doing, why it’s compelling, and how it will lead to a successful exit in terms they can understand. 

3. Derisk as much as you can 
The more you can derisk your product from a market perspective, the bigger the advantage you’ll have when pitching to angel groups. If you haven’t reached the point where you can show revenue, see if you can get an LOI or an even just an email from a potential customer expressing their interest - this is low-hanging fruit for derisking. Demonstrate that you have people at different stages in your pipeline, and that they’re actually progressing. If you’re a deeptech company that’s not going to sell anything for another three to five years, explain who you’re piloting with and who’s helping you validate your product.

4. Prepare ahead for diligence 
To avoid burning time during the diligence part of the process, ask yourself what you think is going to come up and make sure those points are bulletproof. Get your data room and model ready before you pitch - read our Insight with Susan Su for tips on how to build a Data Room that’ll close the deal, and also check out our piece on building a strong proforma with Natalie Volpe.

Jordan Schwartz has lived on both sides of the investing table, first as a CEO raising capital for Pathable, an eventtech software platform that he led to successful exit, and now as an individual impact investor and Screening Committee Co-Chair for the cleantech angel group E8. He recently took the reins at the vanlife app Sēkr as CPO.