Angel Funding? It's Like Having Your Soul Ripped Out. Tips From The Internet Retailer Conference In Chicago

The effort start-ups face stalking angel investors sounds a lot like some of the online dating experiences we've come across. 

A thousand emails, 75 meetings and countless pitches with endless repetition. Still, if the prize is a life-long lover - or in this case $1 million in investment capital then surely its all worth it?

That was the experience of Styleseek.com co-founder and chief executive Tyler Spalding. He told the Internet Retailer Conference's seminar 'A Date With An Angel - Finding Funding For Your Early Stage Retail Business' in Chicago: 'It's just really, really hard. Only a few percent of start-ups in ecommerce can get there. You just can't take it personally.'

It's understandable given the financial risk involved for the investors - and what they expect to get in return.

Angel investors tend to invest in start-up companies and Spalding, according the the Internet Retailing web site, Spalding said even success can be painful. Giving part of your business away is 'like having your soul ripped out,' he said.

Meanwhile, on the other side, Red Rocket Venture Consulting & Capital George Deeb said what to expect from the investors themselves. He suggested:

1) Bear in mind ecommerce can be more financially challenging on some levels than other industries for investors. The cost of acquiring new customers is high and inventory can be expensive and go out of date quickly.

2) Show that you can 'build a better mouse trap' to ensnare your customers. Demonstrate that you are doing things your rivals are not - assuming you are not a first mover, and few really are, he suggests. Show how this works on the balance sheet and have a 'master's knowledge' of your market.

3) Show how easily you can scale the business without costs at the same pace as sales.

4) Apply realistic marketing budgets into your business model. No one is going to be enthralled by a business that sees advertising and paying top rates for every customer - think of ways to grow those margins.

5) Approach investors when there is a 'road map toward profitability in a reasonable amount of time,' he said.

6) Bear in mind investors want 10 times their investment and within a five year horizon.

7) Spalding says consider - with the usual caveats - borrowing from family and friends. Or use business loans or investment from suppliers.

8) Shop locally and use networks, Spalding adds. The investment might come with a ready-made web of contacts from that network - lawyers for example - to hand when the need for such things arises.