Angel investors are the most likely way for you to be able to find funding and investment for your company. Angel investors tend to be wealthy individuals or groups who are willing to put forward sums of cash in order to help a burgeoning enterprise to take its first steps. Unlike venture capitalists, an angel investor will invest their own wealth into a company. Usually this will be in return for convertible debt or equity and they’ll be happy to come onboard at the earliest stages of a company’s evolution.
If you have a small business that you’re seeking investment in, an angel investor is likely the way to go. However, that’s easier said than done. Especially if you’re looking for an investor who brings more than money, but contacts, experience and industry expertise to the table as well. In order to acquire an angel investor, you have to go about it the right way.
1. Start with a solid business plan
Before even considering approaching a potential angel investor, ensure that you have something good to go there with. This includes having a convincing business plan and a compelling pitch. For our take on how to put together a great business plan, check out our article on the subject here.
A business plan will form the bedrock of the investment opportunity proposal that you are making. That’s why it must be both enticing and realistic and thoroughly researched.
2. Know where to look
Angel investors can be found in several places, some perhaps quite unexpected. An angel investor is defined as being anyone who invests personal capital into a start-up company. This can include friends and family, individual investors and angel investment groups.
For many, investment from friends and family is the only viable option. However, this is a route that you must think very, very carefully about before pursuing. If things don’t pan out successfully down the line then a knock-on effect can be irreparable damage to that relationship.
Meeting private angel investors may be preferable then but attracting their attention can be tricky. Here is a great guide to the types of angel investors that exist out there and how you can bring your business proposal to them.
3. Give them a good reason to invest
All angel investors want to get behind an enterprise that will go on to innovate and thrive. Different investors will invest for different reasons too. Some will be entirely in it for the profit they feel they could stand to make. Others will want power within the company. Other angel investors may even contribute entirely altruistically into a company or entrepreneur they believe in. Identify which kind of investor you want, then make sure that your proposition is in line with what they’re seeking.
4. Offer involvement
Some investors will want to be much more hands on than others. Angel investor involvement can translate into a variety of roles and positions, including having board/director status, or operating as an industry mentor to you. Any angel investor looking at your company will want to see a strong and secure management set up in place and may even wish to become a part of that. You need to know how much involvement you’re happy for your investor to have and make sure you can deliver upon what you agree upon.
5. Make sure that any deal suits all parties
Following on from the last point, investor-business deals go sour when one or both sides find they can’t deliver what was agreed upon. You can safeguard against this by being clear what it is you’re looking for and what you can offer in return when you begin seeking an angel investor.
The earlier you make these decisions, and the clearer you are upon them, then you ensure the clarity of your pitch. A clear, concise pitch that is conservative in the promises it makes and the returns it suggests is certainly attractive to angel investors.
Finding an angel investor can be crucial to the future of success of your company. What’s more, an under baked idea and pitch that turns off potential investors can be damaging in equal measure. The key is to have an idea you believe in and do all the groundwork and research you can in order to make your proposition viable.