I was talking to a group of determined entrepreneurs, a food business boot camp in Corvallis, Oregon, and finishing up on business plans when one of them asked me:

What do you recommend for getting angel investment?

I recommend that unless you have a good investment opportunity, you don’t waste your time.

What’s a good investment opportunity?

1. First, it has to be something scalable, defensible, that can grow. That means it’s either a product business, or one of those web services that scale easily. Can you add sales without adding employees? That’s a good clue to scalability.
2. Second, you need people on board with experience in startups. It’s tough if you’re just beginning, but investors worry about risk and nothing reduces risk like having some experience. If you haven’t been involved in a startup, it’s really almost impossible to get investors to take a chance on you. Look for partners or team members who’ve had some startup experience. Ironically, having failed with a startup isn’t always bad; failure is better than no experience at all.
3. Third, you need a believable exit strategy. And you need to be able to convince investors you really want that. Investors don’t want just a small piece of a healthy growing business; they don’t make money unless that business wants to be sold in a few years, meaning it gets acquired by a larger company, and investors get to convert their ownership back into money.

The hard part, as a speaker talking to entrepreneurs, is entrepreneurs want encouragement. But then when I think of how much time and effort some people spend trying to get investment that’s never going to happen, I try to just tell the truth.