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).
How to attract angel investor financing for your 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.
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.
Where to find an angel investor for your startup business
- Local investors
- Know your typical angel investor
They understand the investment risks, and also expect to be well compensated.
- Networking and referrals
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.
- Informal networks
Be on the lookout for an active group of angel investors in your community.
- Online platforms and angel investor websites
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.
- On Startups.
- Tech Coast Angels.
- Golden Seeds LLC.
- Hyde Park Angel Network.
- Angel Investment Network Blog.
- Angel Capital Association (ACA).
- Gust (formerly Angelsoft).
- Canadian Investment Network.
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
Do your homework before approaching an angel group or network.
- Angel investor events
Search for angel investor events in your region.
How to Get Angel Investments for Startup Businesses
- Elevator Pitch
- Pitch Profile
Simply let them know that more information is available upon request.
- Executive Summary
It is in narrative format and covers a paragraph or two about each section.
- Pitch Deck
The pitch deck is your most trusted ally in the angel investor pitch process.
- Pitch Meeting
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.
- Aim of the pitch process
Advantages of using an angel investor to fund your startup business
- Willing to take a risk
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.
- No loans
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
A startup backed by angel investors is more likely to have substantial growth.
Disadvantages of using an angel investor to fund your startup business
- Higher expectations
If you are considering angel investors, you must determine whether the startup is able to expand at the rate the investor expects.
- Strings attached
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.
- Limited control
Even if you get control, you will still be accountable for explaining some of your business decisions.
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.
We can fund diverse projects such as;
Hospitality (hotels and resorts)
green energy projects
Logistics and transportation related developments
Residential and housing developments
ground up construction
commercial real estate
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