Earning the halo: How to build relationships with angel investors, even when they won’t invest in you

Rui Ma, front row second from right, at a 9others meetup for entrepreneurs in Beijing.

Rui Ma is the Greater China Venture Partner for the global seed fund and accelerator 500 Startups. She has been working in finance for over a decade and is well into her second year as a professional angel investor. Follow her on Twitter @ruima.

Disclaimer: the opinions expressed in this piece are the author’s own and not those of her employer or colleagues.

As an angel investor, I get a lot of awkward pitches – lots of which could probably be less awkward and more productive for both parties.

So partially out of self-interest and partially because we really do feel for those of you on the opposite end of the table, I would like to share some of my personal perspectives on what I believe are best practices for building a relationship with an angel investor – particularly with whom you have no prior connection.

Some of you might find my advice to be very basic. But for those of you who aren’t naturally inclined to be your most charismatic self in front of a stranger with a noticeably short attention span, I hope the following five tips can be helpful.

Do your research

What sector does this investor invest in? At what stage? How much money does this person typically invest?

While sector focus is often less clear for many investors, especially those starting out, what is a lot clearer is their typical investment amount and maximum risk tolerance, a stage of development the business has to be in before they are comfortable with parting with their money.

As for the stage of your business, be sure that you’ve made enough tangible progress to at least pique the interest of prospective investors. Of course we have all heard of the serial entrepreneur who got an investment “before there was a business plan.” But in general, with investors you have no prior relationship with, there is usually some minimum bar to meet before a fruitful discussion can occur. Often it is a working demo or prototype. Sometimes, as in the case of 500 Startups, it is having some traction of said product or service.

In terms of investment amount, there is usually some variable range. It’s true investors often like to inflate this number, but you can get some sense of the amount by asking – how many investments have you made in the past year or two? How much have you invested in aggregate? Is it within a million dollars or north of a few million?

Pro Tip: If you don’t know, and you have exhausted all previously named avenues of finding out, then just ask. Ask at the beginning of the meeting rather than the end. Wouldn’t you want to know earlier rather than later? That way, you can actually mine some useful information out of the meeting, and begin to map out future interactions.

Embrace a mindset of giving, not taking

Just like in any relationship, some giving may be required before receiving.

If you realize that an investor is unlikely to invest in your company at its current stage, but still want to develop a relationship with this person, be upfront about this. It is entirely possible the investor will decline the meeting, but there are still many ways for the entrepreneur to make the meeting worthwhile for the investor and frame it as such. At the minimum, appeal to your investor’s strengths and tailor your request for the meeting to a specific “request for expertise.” Make it clear that you have done research on the investor and know their investment thesis, but address any concerns they may have about meeting you “so early.”

One way startups have caught my attention is by approaching me and saying: “We know it is too early for you to invest, but what should we do about China given our x percent of users that live there?” This frames our relationship around an intellectual problem rather than an immediate investment decision, and lends itself easily to a conversation.

Create opportunities for interaction

Communicate and close the loop

Be patiently persistent

Angel investors are like athletics scouts