In this ‘new normal’, the realisation has dawned that rocketing user growth as a metric represented somewhat of an illusion. Some investors perhaps deprioritised fundamentals like business sustainability and long-term pathways to profitability. Not any longer.

According to CB Insights 74% of early-stage VC deals in Q3 2023 went to companies with a focus on unit economics and profitability, compared to 48% in Q3 2022.

In this more challenging economic climate, pathways to funding are certainly not as straightforward. While VCs are demanding higher standards and more tangible metrics, bank loans are subject to more onerous lending conditions.

Against this backdrop, angel investing can certainly represent an attractive funding option, with more flexibility on terms, as well as invaluable expertise, mentorship, and network connections. According to a recent survey of investors on our platform, the majority said they would invest at the same level or more this year, versus only 15% who would be investing less, which is obviously great news for startups.

However, it is crucial for startups seeking funding to recognise how the angel investor mindset has changed with more competition than ever and the criteria for investment markedly changed. Too many are still relying on a 2022 playbook. So, what new approach should they focus on to secure investment?

Following dozens of conversations with investors across our network, here are several of the top tips to help win over angel investors and ensure startups standout from those who have failed to adapt to the ‘new normal.’

1) Build a strong foundation

Before even seeking investment, startups should focus on making significant progress with their business in the ‘bootstrapping’ phase. The more they can achieve on their own, the better the investment case becomes.

Investors are now looking for startups with a clear vision and a solid track record of execution. Many investors are being more cautious with their money, and they now expect a faster route to profitability.  So, startups should be under no illusion that raising will take longer than in the past, they will be heavily scrutinised and they will need a pitch that has a tangible plan to get to profitability fast.

2) Master the art of storytelling

One of the most common traits in successful startups flagged by investors in our network is that startups must be ‘strong storytellers’. 

With increased competition for funding, it is more imperative than ever that the pitch should be clear and concise, avoiding technical jargon that may alienate potential investors. Startups need to be able to explain concepts in simple terms and emphasise the problem that their product or service solves.

This is really fundamental for getting everyone on board – from investors, to staff and of course customers. Investors will need to be able to quickly understand your pitch and see its benefit. So, practice on everyone first and welcome constructive criticism in honing that pitch.

3) Tailor your approach

With more competition than ever for early-stage funding, the importance of a tailored approach for investors is critical. Startups should customise their pitch deck and approach for different types of investors. Consider the industries they have experience in and their specific interests. Tailoring a presentation can make a significant impact.

Indeed, a lack of preparation comes through as one of the main red flags in investors we speak to. So, startups should research their market and know the investor they are pitching to. Entrepreneurs should ensure each investor meeting builds on the last one as they clear each hurdle toward the goal of raising that elusive capital.

4) Ensuring your runway is long enough for take off

When fundraising in the current climate, it is wise for startups to raise more capital than they actually think they need.  From the startup’s perspective, a way of minimising future risk is to ensure they raise enough to give sufficient runway to reach a key goal before needing to raise again.

This operational efficiency will stand them in good stead in an uncertain climate and help ensure they gain enough traction for future raises where tough questions will be asked.

5) Demonstrate early revenues

In the current investment climate, having some early revenues can be a game-changer. Investors are more obviously inclined to support startups that have proof of financial viability, and revenue trumps virtually all other metrics.

According to CB Insights, global venture funding for startups with negative unit economics (meaning they lose money on each customer) decreased by 18% in the first half of 2023 compared to the same period in 2022. This highlights the clear shift in investor preferences towards more sustainable business models.

6) Negotiation flexibility

Startups should also understand that the current competitive landscape might limit their bargaining power. There is intense competition for investor attention, diluting individual startups’ leverage.

As discussed, there is also more caution over limited traction or unproven models.

Entrepreneurs therefore should be prepared to be flexible in negotiations and consider the long-term benefits of securing angel investment.

7) Stay positive

While it's essential to recognise the challenges of the current climate, remember that securing angel investment is still a valuable opportunity. Any pitch should conclude on a positive note, emphasising the long-term benefits and the potential growth your business can achieve with the right investors.

In today's ‘new normal’, securing angel investment needs a combination of preparation, adaptability, and a compelling story. The right approach will set entrepreneurs apart from the competition and help them win out.