How To Find Angel Investors For A Startup
Finding an angel investor is not easy. When you find an angel investor who is willing to invest in your startup business, it can shape your company’s future success.
Besides providing the funding your startup may need, the advice and know-how of an angel investor can be beneficial.
When you are thinking about seeking funding from angel investors, you should know how to get in touch with them.
The best way to find angel investors is by joining angel websites.
This will increase your chances of getting investor funding that you need to grow your startup.
Angel investors are beneficial for startups who need access to funding in the early stages of growth.
Angel investors can choose to make investments at any period of growth for a startup.
They provide startups with funds during pre-seed or seed periods of funding.
Who Is An Angel Investor?
Angel investors are high net worth individuals with the ability to provide startups with a significant amount of capital.
They offer financial backing for small startup businesses, or entrepreneurs in exchange for ownership equity in the company.
Most angel investors are long term investors. They don't often require immediate returns.
Growing a startup into a profitable business can take a long time.
Angel investments may provide smaller funding amounts to a business for the long term.
Angel investors tend to invest in companies that are in familiar industries.
They can be highly motivated to help you succeed through mentoring, or by offering direct management assistance.
They may provide more favorable terms, and usually invest in the entrepreneur rather than the viability of the business.
Angel investors who seed startups that fail during early stages lose all their investments.
This is why professional angel investors always look for opportunities for a defined exit strategy, acquisitions or initial public offerings (IPOs).
Valuation is an important issue for angel investors.
It is best not to discuss valuation in a first meeting other than to say you expect to be reasonable on valuation.
Most angel investors do not want to waste a lot of time on a deal if the valuation expectations are unreasonable, or not attractive.
How To Attract Angel Investor Financing For A Startup Business
Target angel investors who invest in your location.
Target angel investors who invest in your industry.
Have a great investor pitch deck.
Practice your pitch and get feedback.
Be prepared to have pitch meetings.
Do a product demonstration.
Make sure you have researched the competition.
Anticipate the questions you may get about your competitors.
Show the investor an opportunity for exit in a few years through acquisition or IPO.
Where To Find An Angel Investor For Your Startup
Many angel investors prefer to invest in businesses that are close to their locations.
Know your typical angel investor
Keep a profile of your “typical” angel investor in mind when searching.
Angel investors look for companies with growth and export potential.
They understand the investment risks, and also expect to be well compensated.
Networking and referrals
You may need to be referred to an angel investor. To find angel investors, you need to get to know the right person.
Get involved in your local business, civic, and social community organizations.
Focus on business owners, join business and trade organizations, and regularly attend the meetings. Attend trade fairs and local events.
Many angel investors operate as part of an informal network or syndicate where they can pool their funds and share the investment risks.
Be on the lookout for an active group of angel investors in your community.
Online platforms and angel investor websites
You may be able to find an angel investor through one of the websites that provides entrepreneur and angel investor matching.
You can also get your business proposal in front of a wider audience.
Some of the most popular angel investment websites include;
Life Science Angels.
Tech Coast Angels.
Golden Seeds LLC.
Hyde Park Angel Network.
Angel Investment Network Blog.
Angel Capital Association (ACA).
Gust (formerly Angelsoft).
Canadian Investment Network.
These websites do not directly provide angel investor funding.
They offer a chance to make a connection with angel investors who may be interested in your startup business.
Each site is going to have its own requirements and expectations for connecting with angels.
Pay close attention to the rules and processes outlined on the sites.
Angel groups and networks
There are angel groups and networks that are the best and efficient way to get in touch with angel investors.
Do your homework before approaching an angel group or network.
Angel investor events
Angel investor events are a great opportunity to get your startup in front a range of angel investors actively looking to invest.
Search for angel investor events in your region.
Aim of the pitch process
The goal of your first few investor meetings is to establish a relationship that will naturally lead to a deal. Be yourself.
Represent the opportunity and your passion for the business.
That is all you need to convince someone to make an investment deal.
How to Pitch Angel Investors
When you pitch to an angel investor, present your business information in a compelling way.
Do so honestly and with compassion. It is not that hard to figure out how to pitch angel investors properly.
The elevator pitch is not a sales pitch. It is a short, well-crafted explanation of the problem you solve.
How you solve it, and how big of a market there is for that solution.
Send a link to your online pitch profile. This provides a way for the angel investor to request more information.
Most angel investors will request either an executive summary or a pitch deck.
Simply let them know that more information is available upon request.
The executive summary is a two to three page synopsis of the business plan.
It covers the problem, solution, market size, competition, management team and financials.
It is in narrative format and covers a paragraph or two about each section.
A pitch deck is your business plan or executive summary spread across 10 to 20 slides in a PowerPoint document. Pitch decks are brief and on point.
The pitch deck is your most trusted ally in the angel investor pitch process.
Pitch meeting is more about meeting the investor. Take some time to try to establish some rapport.
Investors will more often invest in an entrepreneur they like.
During the pitch meeting you will run through your pitch deck and answer questions.
The goal is to find an aspect of the business that the investor cares about. Focus more on the conversation.
Advantages Of Angel Investor Financing
Willing to take a risk
Angel investors are often established entrepreneurs who understands the level of involved risk and are at ease with taking it on.
Angel investors usually make a bigger investment if they believe in the startup’s potential. An angel investor can sense a good idea and a good deal.
Angel investors offer business funding in exchange for an ownership stake in your startup.
If the startup takes off, you share the financial rewards. If the business fails, an angel investor will not expect you to pay back the funds.
Increased odds of success
Angel investors bring years of expertise to a startup business. They understand what it will take for a business to succeed.
A startup backed by angel investors is more likely to have substantial growth.
There are many reasons why you should consider seeking funding from angel investors for your startup.
These investors can provide you with a significant sum of money without expecting too much in return.
The funds you can get from angel investors may be able to help you create a more secure base for your startup company.
Angel investors may be more patient with entrepreneurs.
But, they also want to see an exit strategy at some point when they can pocket their profits.
An angel investor needs to feel confident that the potential rewards from investing are worth the downside risks.
Angel investors review several key issues and undertake due diligence before they invest in a startup business.
Disadvantages Of Angel Investor Funding
An angel investor’s higher risk usually leads to higher expectations. They are in business to earn money.
If you are considering angel investors, you must determine whether the startup is able to expand at the rate the investor expects.
Handing an equity stake to angel investors is giving away a portion of your future net earnings.
The percentage of ownership an angel investor requests depends on how much they are investing.
Carefully assess the terms to ensure the quantity of ownership you give away, does not eat into your future business profits.
An angel investor won’t invest money without taking an interest in how the funds are used.
It is more likely that the investor is going to want to be involved in decision making.
Even if you get control, you will still be accountable for explaining some of your business decisions.