Even in a tight economy, there’s a lot of capital out there waiting to be tapped by small and midsize companies.  Before you make your move, however, be aware of what investors expect.

Consider the numbers, from the University of New Hampshire’s Center for Venture Research:

In 2008 — a rough year all around — “angel” investors showered $19.2 billion on more than 55,000 ventures, for an average of $346,500 per deal.  The total was down from $26 billion in 2007, but still a pretty good chunk.

Most of that money went to start-ups or near-start-ups, including new ventures by entrepreneurs who have other successful operations going.

Traditional venture capitalists made 440 investments in start-ups last year in deals averaging $7.5 million; VCs tend to put the bulk of their money in later stages of a company’s growth.

The system
Usually, you’re expected to make your initial pitch to in an informal session. If your plan has promise, you might be invited back to give a PowerPoint presentation followed by a question-and-answer session.

Time is money, especially in this process. Waste time, and you’ll likely lose the money. So be sure to show up at all meetings prepared to:

• Present a  solid argument about the marketability of your product or service — including growth potential and which large companies might be interested in acquiring your venture if it’s successful.  Rehearse first. If you’re not a good, clear speaker, learn how to be one.
• Show your commitment, in the form of sweat equity or your own cash investment
• Present success scenarios, from wildly successful to middle-of-the road; don’t be afraid to mention the possibility of failure and why it might happen — that’s further evidence that you’ve thought things out
• Show you have a product on the market, if possible.

And think volume: Get in front of as many investors as you can in as many meetings as you can. Because one isn’t interested doesn’t mean no one’s interested.

And then there’s what not to do.

• Being enthusiastic is good, investors say. Being slick isn’t good. There’s a fine line there, of course. The key to avoid crossing it is to be honest and be yourself.
• Studies out of several universities show that style rarely carries the day in an entrepreneur’s presentation. Investors want substance — as shown in your ideas and commitment to them.
• Next pitfall: being evasive. Trying to give a sly answer when you don’t have a good answer is a sure path to the word “no” from investors. The expert’s advice: If you don’t know the answer, say you don’t know and promise to get back to the investor on it, if possible. Also consider acknowledging that your ignorance is one reason you’re looking for investors — to expand your knowledge of the market or product.

More information is available at angelsoft.net.