The off-site housing industry is red hot today and many new startups and wannabe factory owners are looking to get on board, many with projects, designs and innovative new ways to construct buildings.
Unless these ‘new to off-site construction’ people have a background in this industry, finding enough money to start up their business and making the business last more than two years will be one of the hardest things they will ever do.
There’s even a TV show about getting money called Shark Tank where new entrepreneurs stand in front of the Sharks and pitch their new product or company. Sometimes they succeed, sometimes not.
You probably will never be on Shark Tank but trust me, sitting at a conference table with a Venture Capitalist (VC) or an Angel Investor will be one of those experiences you will remember for a long time.
And in most cases, it won’t be a pleasant one.
There are differences between the VC and the Angel you need to be aware of before you even begin the process.
Venture capital means big-money investment managed by professional investors spending other people’s money. The money comes from extremely wealthy people, insurance companies, university endowments, big corporations, etc.
Angel investment is people who are accredited investors as defined by the U.S. Securities and Exchange Commission (SEC), which sets wealth criteria:
they must have a net worth of at least one million US dollars, not including the value of their primary residence or have income at least $200,000 each year for the last two years (or $300,000 together with their spouse if married) and have the expectation to make the same amount this year.
Friends and Family
Before we go any further, there is another type of investor called “Family and Friends.” Please don’t go to them for money unless you’ve exhausted every other scenario and are prepared to lose them as friends after your business goes bust.
Why would Friends and Family ever think you will be a success if every VC and Angel Investor turned you down?
Venture capital is the hardest to get. If you have to ask whether your startup is a venture capital candidate, then it probably isn’t. Angel investment is not the same as venture capital.
Angel Investors
Finding Angel Investors is not hard. Finding a way to get them to invest in your off-site construction idea is. Even though there aren’t the large sums of money that would interest a Venture Capitalist, they are likely to dive even deeper into you and your background.
When seeking funding, avoid email templates like the plague. Serious investors don’t read executive summaries, or watch a pitch—much less read a business plan—when it looks like it’s being sent in bulk to multiple investors as investors rarely look at business plans coming in unsolicited.
Angel investors each have their unique interests, identities, and personalities. They have preferences about where they invest, at what stage, and what amounts. Most of them have websites, and most of the websites announce their preferences. They don’t want to deal with people who aren’t in their category and don’t know it. They expect you to know that before you talk with them.
Here’s an important suggestion. Look first for introductions by checking with people you know who might know them and any contacts in the off-site factories or companies in which they’ve already invested.
Your chances are way better if you fit their normal profile and you’ve been able to meet one of the partners or get an introduction from somebody they know.
Once you meet an Angel Investor, you need to be able to describe your business in a sentence or two and that sentence has to be intriguing. Forget the 60-second elevator. Angels are very familiar with their unique area of off-site construction and if you can’t grab their interest in two sentences, you will probably not get them interested...ever.
Put together an excellent quick video or one-page pitch, and send that as the follow-on email when you talk with an angel or get an introduction. Expect the real information exchange to happen in email. You don’t open with a Zoom conference. That could be an hour or more wasted time for both you and your potential Angel.
If your summary works, then the next step is a pitch. Yes, there is a “Pitch Deck” or video where you make your case for someone to invest in your off-site project but the real reason for presenting your pitch is for the Angel Investors to meet you and see your passion in person. Angels, like all seasoned investors in the construction industry, are just the investors on Shark Tank. They know how to attack you and your proposal and if you survive the sharks, you are getting closer to actually getting someone to invest in you.
Don’t be the Ringmaster of your circus and then forget to bring in the clowns and lions. Your Pitch is what brings in the audience of investors but your Business Plan is what they want to see.
Don't burn any bridges
You’ve heard the expression “this ain’t my first rodeo.” Well, yours isn’t the first Business Plan they’ve looked at. If they make suggestions or worse, turn you down. Find out why and change your Business Plan to reflect that. Keep updating it. You might end up going back to the ones that turned you down the first time.
In all honesty, the Business Plan you presented to them to get them to invest will probably not look much like the one the Angels and you end up with. Don’t fall in love with the “Pitch” Business Plan.
And finally, the process of actually finding an Angel Investment group and the time after they agree to fund your idea will take way longer than you think. It’s a lot of money and both sides will want it to work.
To all of you looking to find the funding for your next off-site project, I wish you the best. Just remember, you’re going to kiss a lot of frogs before you find your Angel.
Contact me at modcoach@gmail.com
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