An angel investor is an experienced business owner or entrepreneur who uses their personal wealth to boost startups or small businesses. Not only do they invest their money, but they often give their time, acting as mentors to the business owners they believe in. In return for their time and investment, angel investors usually get equity in the business.
More often than not, they have had previous business success that has allowed them to make the funds needed to invest in other businesses.
First, a few tips on where to look
Finding an angel investor willing to invest in your business is often a dream of many entrepreneurs and business owners. While it does take time, there are certainly a few steps you can take that will improve your chances of finding the right fit.
Keep it local
Look for angel investors in your city. As mentioned above, most angels like to act as mentors to the business owners they are investing in. This means that being nearby, or at least within the same city, could make you a more appealing candidate.
Consider friends and family
While this may not be the best option for all business owners looking for funding, if you’re OK with mixing family (or friends) with work, then this is one possibility to consider. Working with someone who knows you well and already has a deep understanding of your business can be beneficial, especially for a startup business.
Check online investor platforms
Online angel investor networks have really exploded in the past couple of years. It’s a great way for small business owners, who may not have many connections or opportunities to make them, to find an investor.
Since there are many of these online platforms to choose from, you should start with some research. Maybe there is a specific platform for your industry or one that caters to your type of business.
Just make sure you find one that meets your needs and that you understand all the rules and regulations before signing up.
Network at investor events and elsewhere
In general, most small business owners are introduced to an angel investor via a connection they have. This is where networking can be helpful if you’re interested in this type of small business funding.
Networking with the goal of finding an angel investor can be done at angel investor events.
These types of events are put on in most major cities and are one of the best ways to meet many angel investors within a short period of time.
Another benefit of attending an angel investor event is that the investors at the show are looking for businesses or owners to invest in. This means they want to hear your pitch and discuss your ideas, so your chances of finding the right fit are high.
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Closing the deal
Once you’ve found one or more angel investors who are a good fit for your business, your next step is to convince them to choose you. Use these steps as a guide:
1. Get to know your angel
Angel investments create long-term relationships between investors and business owners. This is why it’s important that you get to know any potential angel investors and their previous investment deals before you reach out to them.
It could also be advantageous to have a good understanding of the angel investor’s personal business success. This will show you are serious about the partnership.
2. Be prepared for homework
As with any business deal, especially those that involve an investment, your angel investor is going to do a significant amount of research on you. Make it a priority to be ready for this.
The average angel investor will consider the following things when performing their review:
- Your business’s financial statements
- Ownership and corporate structure of the business
- Technology that the business owns
- Marketing efforts
- The product(s) your business sells, if any
Make sure all of this information is readily available before you approach angel investors. Delaying any step of the process could put the deal at risk.
3. Make sure your pitch is honest and relatable
Before your first meeting, it’s important that you have your pitch prepared.
Your presentation must convince them; it should be no longer than 10 slides (20 minutes).
Simple, relatively quick, and honest are the objectives you should aim for. Angel investors want to hear your story, understand what your product or service is, and ultimately leave the meeting knowing what problem you’re trying to solve or void in the market you’re trying to fill.
4. Build a great team
Yes, angel investors are looking to invest in an owner with a marketable idea and a business to back it up, but they’re also looking for a great team. Finding the right people to work for you is a process. But if working with an angel investor is a goal of yours, either now or down the line, put in the effort needed to build a team worth investing in.
5. Be realistic
Finally, it’s important to be realistic. Be realistic in the way you present yourself and your business. An angel investor is looking for a business with the potential to grow. Yes, they’ll want to see that you’ve had success, but room for growth is important.
Overselling the value of your company could jeopardize the potential investment.
In addition, be realistic about your expectations. You may need to meet with several angel investors before you find the right fit. Not everyone will have as much enthusiasm for your business as you do. Finding the right partner is important and it may take several tries.
The bottom line on angel investors
Landing an angel investor who can help lift your business to the next level will take some time and effort on your part.
From finding the right investor, whether through networking or personal relationships, to making sure your business is in good standing and your pitch is on point, it’s all on you. The effort you commit will pay off both in new capital and the priceless mentoring you’ll receive from your angel investor.