The Long Island Angel Network was formed to expose interested and knowledgeable investors to promising young ventures with potential for major contributions to the economic future of Long Island. The Network has declined to consider ventures in the consumer, entertainment, and financial services sectors; a strong technology component is expected as a foundation for the venture’s business model. Enterprises in the software/information technology/telecom, biotechnology/medical devices, microelectronics, and alternative energy/environmental sectors are of particular interest. If your company is not already based on Long Island, you will be expected to locate at least a significant, mission-critical portion of your business here (Nassau and Suffolk Counties) before our members’ investment closes.
In addition to specific business sectors or technologies, every investor has his/her own thresholds, preferences and emphases in the evaluation of a new venture, but the summary below provides a good synthesis of common concerns.
LIAN investors look for teams of high-quality entrepreneurs with a track record of leadership and performance – either in the company’s specific industry or in prior entrepreneurial ventures. LIAN investors also look at your team’s passion for and commitment to the new business idea, and your ability to inspire confidence among future stakeholders, including employees, potential customers, and investors. As we will be working together as partners, your team’s credibility is essential. In addition, your team must be open to and comfortable with receiving input provided by angel investors.
LIAN members prefer to invest in solutions that address major problems for significantly large target markets (i.e. a $100+ million market). Your company must demonstrate a strategy to claim a significant share of this market (i.e. 20% or more). There are plenty of great business ideas – but not all businesses will generate returns that justify angel investor and venture capital financing. Therefore, providing a solution to a problem with a large potential market is essential.
Use of proceeds
The funds being invested must be used to accelerate your company’s achievement of key milestones that increase the company’s value. These activities may include research and product development, building a sales and marketing infrastructure and hiring key executives.
LIAN members look for companies that can grow quickly and manage the scale necessary to succeed. Your company must demonstrate a plan to generate significant profits beyond the initial product idea. Do you have a strategy to achieve multiple sources of revenue? Well-conceived financial projections, based on sound assumptions, demonstrating consistent profits and cash flow growth are also expected.
Your company must have some proprietary features that distinguish you from potential competitors or provide barriers to entry that prevent other companies from capturing your customers with a similar offering. Attributes that convey competitive advantage may include intellectual property protection, exclusive licenses, exclusive marketing and distribution relationships, strong brands, scarce human resources (i.e. knowledge and skills), and access to scarce raw materials.
LIAN members – all accredited individual investors – have significant executive experience in a variety of fields. One of the benefits of working with angel investors is the active coaching and contact network that such investors can provide. As such, there must be a fit between LIAN member investors and your idea.
LIAN members prefer to invest in first-of-a-kind new ideas, rather than incremental enhancements to common products and services. Is this a nice-to-have or a NEED-to-have product or service? However, highly complex technologies or esoteric concepts will be approached with caution. The concept must be proven and verifiable. Further with regard to technology, LIAN members avoid science projects that don’t demonstrate a clear path to commercialization. Any breakthrough innovation must be accompanied by a strong business plan.
LIAN members typically seek returns of at least ten times their initial investment within eight years. This level of return on investment is essential due to the high risk and likelihood of failure among early stage ventures. Thus, a clearly articulated exit strategy – how angel investors will extract such returns – is essential. For example, do you plan to sell the company to an established corporation in your industry? Or will your exit be through subsequent rounds of financing, i.e. venture capital or the public markets? Angel investors are not just interested in the strategy you select, but more importantly in the how – the operational strategy that shows specific steps you will take to achieve the exit.