Entrepreneurs often ask me if it's worth it to apply for funding via a group of investors, i.e. angel networks. The promise of having so many potential investors in one room for your pitch and having a well-known group back you with a large, aggregate amount of money can be appealing. However, every member in the group is making an independent decision as to whether to invest or not, and sometimes the diligence process can be long and frustrating when you are "herding cats" to reach a decision. Knowing how the angel networks operate before beginning a process can increase your chances of funding success.
There are benefits to pitching, even if you don't get funded.
First of all, you don't have much to lose. In a worst case scenario, you submit a short application and are potentially invited in to make a ~10 minute pitch and answer ~10 minutes of questions. That's not a huge outlay of time. If, after you pitch, the group decides not to proceed with you or you decide not to continue the process, you have still shared your story with a lot of highly influential and accomplished people. They may be helpful in spreading the word about you to other movers and shakers and/or suggesting strategic opportunities that may be relevant for you.
Angel networks don't operate during certain times of the year.
Be aware of the group's seasonality of activity. For example, most angel groups don't hold meetings in the late December/early January holiday period or in August. Plan accordingly. If you know this in advance, you can avoid the frustration of starting a diligence process right before the holidays and then potentially losing momentum and having the whole fundraising process take longer than expected.
Research the group before applying and seek out an internal champion.
Do your diligence on the group before applying. Talk to the entrepreneurs from the group's portfolio companies and ask them about the process for tips. Research the individual members' backgrounds for potential fit with your company. Look for alumni connections. Know which members actively and regularly lead deals and seek out warm introductions. If a member has recommended you apply to the group, cite their name when submitting your application. Having a member internally vouch for you and help guide you through the process is key; it can be the difference between whether you get funded or not.
Be prepared with your diligence items before starting the process.
Have your diligence items ready. If you anticipate the questions that will be asked and keep all the files in a handy location, you can speed up your diligence process by responding quickly in an organized way. This can help keep the momentum going and encourage the members to respond in kind so that your diligence process doesn't take too long.
Be specific about ways the group or its members might be a fit with your company.
Consider including an "ask" in your pitch which might be attractive to the group's members. For example, if you think there may be members who could serve on your Advisory Board, mention that as it may provide an opportunity for you to start a relationship with angels and receive strategic advice, regardless of whether they choose to invest or not. If you understand the strengths of particular members of the group and how that may benefit your company, it may serve as "a hook" for them to see how they could make an investment and stay involved.
You do not need to proceed with the group if you don't feel it's a fit.
Remember that the process is always in your control. If the due diligence process doesn't feel right to you or you don't think the members are a fit for your company, you don't have to proceed. You do not need to spend time on diligence if you don't want to continue the conversation or if you feel like the process is taking too long.
There are opportunities to present to the network again.
Don't think of pitching as a binary outcome (i.e. you get funded or get rejected). If the group declines to proceed with your company, they haven't rejected you forever. You can make progress on their comments and revisit the opportunity to pitch them at a later date. Don't be discouraged if the initial answer is no.
Angel networks can be a great place for you to secure crucial funding and active early investors for your startup. They can also be frustrating if you're stuck in a diligence process that doesn't feel like it's leading to investment. My recommendation is to do your research on the members and potential for fit and give it a shot. It doesn't take too much time to apply and pitch, and even if you don't get funding, it may be worth it just to share your vision with a number of influential people.